Stock Analysis

Dividend Investors: Don't Be Too Quick To Buy Daelim B&Co Co.,Ltd. (KRX:005750) For Its Upcoming Dividend

KOSE:A005750
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Daelim B&Co Co.,Ltd. (KRX:005750) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 6th of April.

Daelim B&CoLtd's next dividend payment will be ₩130 per share, and in the last 12 months, the company paid a total of ₩130 per share. Calculating the last year's worth of payments shows that Daelim B&CoLtd has a trailing yield of 2.1% on the current share price of ₩6150. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Daelim B&CoLtd

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. Daelim B&CoLtd lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.

Click here to see how much of its profit Daelim B&CoLtd paid out over the last 12 months.

historic-dividend
KOSE:A005750 Historic Dividend December 24th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Daelim B&CoLtd was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, Daelim B&CoLtd has increased its dividend at approximately 3.0% a year on average.

Get our latest analysis on Daelim B&CoLtd's balance sheet health here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Daelim B&CoLtd? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Although, if you're still interested in Daelim B&CoLtd and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 4 warning signs for Daelim B&CoLtd (2 are a bit unpleasant!) that deserve your attention before investing in the shares.

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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