There's A Lot To Like About DUAL's (KRX:016740) Upcoming ₩120.00 Dividend

It looks like DUAL Co., Ltd. (KRX:016740) is about to go ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase DUAL's shares before the 29th of December to receive the dividend, which will be paid on the 21st of April.

The company's upcoming dividend is ₩120.00 a share, following on from the last 12 months, when the company distributed a total of ₩120 per share to shareholders. Based on the last year's worth of payments, DUAL has a trailing yield of 3.2% on the current stock price of ₩3790.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. DUAL has a low and conservative payout ratio of just 10% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 10% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for DUAL

Click here to see how much of its profit DUAL paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see DUAL has grown its earnings rapidly, up 26% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, DUAL looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. DUAL has delivered an average of 7.0% per year annual increase in its dividend, based on the past six years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is DUAL worth buying for its dividend? We love that DUAL is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in DUAL for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for DUAL and you should be aware of this before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.