Here's What We Like About DUAL's (KRX:016740) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see DUAL Co., Ltd. (KRX:016740) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, DUAL investors that purchase the stock on or after the 27th of December will not receive the dividend, which will be paid on the 22nd of April.

The company's next dividend payment will be ₩120.00 per share, on the back of last year when the company paid a total of ₩120 to shareholders. Looking at the last 12 months of distributions, DUAL has a trailing yield of approximately 3.6% on its current stock price of ₩3365.00. 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.

See our latest analysis for DUAL

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DUAL paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 12% of its 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.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at DUAL, with earnings per share up 3.7% on average over the last five years. DUAL is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. DUAL has delivered 8.4% dividend growth per year on average over the past five years. 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 DUAL got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and DUAL is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and DUAL is halfway there. DUAL looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in DUAL for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for DUAL that you should be aware of before investing in their shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.