Here's What We Like About Daedong Industrial's (KRX:000490) Upcoming Dividend

Daedong Industrial Co., Ltd. (KRX:000490) stock is about to trade ex-dividend in four days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 24th of April.

Daedong Industrial's next dividend payment will be ₩60.00 per share, on the back of last year when the company paid a total of ₩60.00 to shareholders. Based on the last year's worth of payments, Daedong Industrial stock has a trailing yield of around 0.9% on the current share price of ₩6640. 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.

See our latest analysis for Daedong Industrial

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Daedong Industrial paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 1.3% 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 how much of its profit Daedong Industrial paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Daedong Industrial, with earnings per share up 7.6% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Daedong Industrial's dividend payments per share have declined at 1.5% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

Is Daedong Industrial an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Daedong Industrial is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Daedong Industrial is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Daedong Industrial for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Daedong Industrial you should know about.

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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