Do These 3 Checks Before Buying Dong Yang Piston Co., Ltd. (KRX:092780) For Its Upcoming Dividend

Dong Yang Piston Co., Ltd. (KRX:092780) stock is about to trade ex-dividend in 3 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 21st of April.

Dong Yang Piston's next dividend payment will be ₩60.00 per share. Last year, in total, the company distributed ₩120 to shareholders. Based on the last year's worth of payments, Dong Yang Piston stock has a trailing yield of around 2.2% on the current share price of ₩5440. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Dong Yang Piston

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. Dong Yang Piston lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Dong Yang Piston didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out an unsustainably high 218% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Dong Yang Piston intends to continue funding this dividend, or if it could be forced to cut the payment.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Dong Yang Piston was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Given that Dong Yang Piston has only been paying a dividend for a year, there's not much of a past history to draw insight from.

We update our analysis on Dong Yang Piston every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Dong Yang Piston? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. It's not that we think Dong Yang Piston is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Dong Yang Piston despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Dong Yang Piston is showing 5 warning signs in our investment analysis, and 2 of those are significant...

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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