Should You Buy Duckyang Ind. Co., Ltd. (KRX:024900) For Its Upcoming Dividend?

Readers hoping to buy Duckyang Ind. Co., Ltd. (KRX:024900) 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 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Duckyang Ind's shares before the 27th of December to receive the dividend, which will be paid on the 15th of April.

The company's next dividend payment will be ₩50.00 per share. Last year, in total, the company distributed ₩50.00 to shareholders. Calculating the last year's worth of payments shows that Duckyang Ind has a trailing yield of 1.7% on the current share price of ₩2970.00. If you buy this business for its dividend, you should have an idea of whether Duckyang Ind'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.

See our latest analysis for Duckyang Ind

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 82% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether Duckyang Ind generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 13% 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 Duckyang Ind paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Duckyang Ind's earnings have been skyrocketing, up 57% per annum for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, five years ago, Duckyang Ind has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Duckyang Ind? We like Duckyang Ind's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Duckyang Ind looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Duckyang Ind is facing. For example - Duckyang Ind has 4 warning signs we think 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.