Dohwa Engineering Co., Ltd. (KRX:002150) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Dohwa Engineering Co., Ltd. (KRX:002150) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 31st of March.

Dohwa Engineering's next dividend payment will be ₩250 per share, on the back of last year when the company paid a total of ₩250 to shareholders. Last year's total dividend payments show that Dohwa Engineering has a trailing yield of 3.0% on the current share price of ₩8370. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Dohwa Engineering can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Dohwa Engineering

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. Dohwa Engineering paid out a comfortable 41% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 34% of its free cash flow in the past year.

It's positive to see that Dohwa Engineering'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 Dohwa Engineering 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Dohwa Engineering has grown its earnings rapidly, up 74% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Dohwa Engineering has delivered 9.6% dividend growth per year on average over the past three years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Dohwa Engineering worth buying for its dividend? Dohwa Engineering has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Dohwa Engineering, and we would prioritise taking a closer look at it.

In light of that, while Dohwa Engineering has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Dohwa Engineering that you should be aware of before investing in their shares.

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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