Why It Might Not Make Sense To Buy AJU IB INVESTMENT Co., Ltd. (KOSDAQ:027360) For Its Upcoming Dividend
Readers hoping to buy AJU IB INVESTMENT Co., Ltd. (KOSDAQ:027360) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Accordingly, AJU IB INVESTMENT investors that purchase the stock on or after the 29th of December will not receive the dividend, which will be paid on the 16th of April.
The company's next dividend payment will be ₩50.00 per share, on the back of last year when the company paid a total of ₩50.00 to shareholders. Looking at the last 12 months of distributions, AJU IB INVESTMENT has a trailing yield of approximately 1.5% on its current stock price of ₩3290.00. If you buy this business for its dividend, you should have an idea of whether AJU IB INVESTMENT's dividend is reliable and sustainable. So we need to investigate whether AJU IB INVESTMENT can afford its dividend, and if the dividend could grow.
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. AJU IB INVESTMENT distributed an unsustainably high 132% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
View our latest analysis for AJU IB INVESTMENT
Click here to see how much of its profit AJU IB INVESTMENT paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. AJU IB INVESTMENT's earnings per share have fallen at approximately 23% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past six years, AJU IB INVESTMENT has increased its dividend at approximately 12% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. AJU IB INVESTMENT is already paying out 132% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
Final Takeaway
From a dividend perspective, should investors buy or avoid AJU IB INVESTMENT? Earnings per share are in decline and AJU IB INVESTMENT is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that in mind though, if the poor dividend characteristics of AJU IB INVESTMENT don't faze you, it's worth being mindful of the risks involved with this business. For instance, we've identified 4 warning signs for AJU IB INVESTMENT (2 don't sit too well with us) you should be aware of.
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.