Nara Mold & Die (KOSDAQ:051490) Will Pay A Dividend Of ₩90.00

The board of Nara Mold & Die Co., Ltd. (KOSDAQ:051490) has announced that it will pay a dividend of ₩90.00 per share on the 13th of April. This means that the annual payment will be 2.2% of the current stock price, which is in line with the average for the industry.

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Nara Mold & Die's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Nara Mold & Die's earnings. This means that a large portion of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 8.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 60%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Nara Mold & Die

Nara Mold & Die's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the dividend has gone from ₩70.00 total annually to ₩90.00. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Nara Mold & Die has seen earnings per share falling at 8.5% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 4 warning signs for Nara Mold & Die that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.