Is It Worth Considering DRB Industrial Co., Ltd. (KRX:163560) For Its Upcoming Dividend?

Readers hoping to buy DRB Industrial Co., Ltd. (KRX:163560) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 22nd of April.

DRB Industrial's next dividend payment will be ₩100.00 per share, on the back of last year when the company paid a total of ₩97.80 to shareholders. Looking at the last 12 months of distributions, DRB Industrial has a trailing yield of approximately 1.0% on its current stock price of ₩9740. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for DRB Industrial

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. DRB Industrial paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether DRB Industrial generated enough free cash flow to afford its dividend. It paid out 5.0% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that DRB Industrial's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit DRB Industrial 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. DRB Industrial's earnings per share have fallen at approximately 19% 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 three years, DRB Industrial has increased its dividend at approximately 8.7% a year on average.

To Sum It Up

Should investors buy DRB Industrial for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy DRB Industrial today.

So while DRB Industrial looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that DRB Industrial is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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