There's A Lot To Like About Dongwon Systems' (KRX:014820) Upcoming ₩300.00 Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Dongwon Systems Corporation (KRX:014820) is about to go ex-dividend in just three days. 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. 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. In other words, investors can purchase Dongwon Systems' shares before the 27th of August in order to be eligible for the dividend, which will be paid on the 9th of September.
The company's next dividend payment will be ₩300.00 per share. Last year, in total, the company distributed ₩600 to shareholders. Based on the last year's worth of payments, Dongwon Systems stock has a trailing yield of around 2.9% on the current share price of ₩20550.00. If you buy this business for its dividend, you should have an idea of whether Dongwon Systems's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Fortunately Dongwon Systems's payout ratio is modest, at just 28% of profit. 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. Luckily it paid out just 17% of its free cash flow 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 Dongwon Systems
Click here to see how much of its profit Dongwon Systems paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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 not encouraging to see that Dongwon Systems's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Dongwon Systems has delivered an average of 2.6% per year annual increase in its dividend, based on the past seven years of dividend payments.
Final Takeaway
Is Dongwon Systems an attractive dividend stock, or better left on the shelf? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Dongwon Systems is halfway there. Overall we think this is an attractive combination and worthy of further research.
Want to learn more about Dongwon Systems's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.