Daelim Industrial (KRX:000210) Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Daelim Industrial Co., Ltd. (KRX:000210) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 24th of April.

Daelim Industrial's next dividend payment will be ₩1,300 per share, and in the last 12 months, the company paid a total of ₩1,300 per share. Calculating the last year's worth of payments shows that Daelim Industrial has a trailing yield of 1.5% on the current share price of ₩88400. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Daelim Industrial can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Daelim 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. Daelim Industrial is paying out just 7.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 7.4% of its free 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Daelim Industrial has grown its earnings rapidly, up 26% a year for the past five years. Daelim Industrial looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Daelim Industrial has delivered an average of 29% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Daelim Industrial got what it takes to maintain its dividend payments? It's great that Daelim Industrial is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

So while Daelim Industrial looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Daelim Industrial and understanding them should be part of your investment process.

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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