Should Income Investors Look At Dawonsys Co.,Ltd. (KOSDAQ:068240) Before Its Ex-Dividend?

It looks like Dawonsys Co.,Ltd. (KOSDAQ:068240) is about to go ex-dividend in the next three days. 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 29th of April.

DawonsysLtd's next dividend payment will be ₩100.00 per share. Last year, in total, the company distributed ₩100.00 to shareholders. Looking at the last 12 months of distributions, DawonsysLtd has a trailing yield of approximately 0.5% on its current stock price of ₩20350. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for DawonsysLtd

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. That's why it's good to see DawonsysLtd paying out a modest 50% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 8.9% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that DawonsysLtd'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 DawonsysLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. DawonsysLtd's earnings per share have fallen at approximately 11% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Unfortunately DawonsysLtd has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Should investors buy DawonsysLtd 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. To summarise, DawonsysLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks DawonsysLtd is facing. Be aware that DawonsysLtd is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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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