Dong Suh Companies Inc. (KRX:026960) Is About To Go Ex-Dividend, And It Pays A 4.4% Yield
Readers hoping to buy Dong Suh Companies Inc. (KRX:026960) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Dong Suh Companies' shares on or after the 28th of August will not receive the dividend, which will be paid on the 18th of September.
The company's upcoming dividend is ₩250.00 a share, following on from the last 12 months, when the company distributed a total of ₩1,140 per share to shareholders. Last year's total dividend payments show that Dong Suh Companies has a trailing yield of 4.4% on the current share price of ₩25700.00. 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.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 78% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Dong Suh Companies generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (90%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Dong Suh Companies's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Check out our latest analysis for Dong Suh Companies
Click here to see how much of its profit Dong Suh Companies 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Dong Suh Companies earnings per share are up 4.3% per annum over the last five years. A payout ratio of 78% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Dong Suh Companies has delivered an average of 6.3% per year annual increase in its dividend, based on the past eight 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.
Final Takeaway
Has Dong Suh Companies got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Dong Suh Companies paid out a bit over half of its earnings and free cash flow last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
However if you're still interested in Dong Suh Companies as a potential investment, you should definitely consider some of the risks involved with Dong Suh Companies. Every company has risks, and we've spotted 1 warning sign for Dong Suh Companies you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.