Should Income Investors Look At Daechang Forging Co., Ltd. (KRX:015230) Before Its Ex-Dividend?

Daechang Forging Co., Ltd. (KRX:015230) stock is about to trade ex-dividend in four days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 17th of April.

Daechang Forging's next dividend payment will be ₩220 per share, and in the last 12 months, the company paid a total of ₩220 per share. Based on the last year's worth of payments, Daechang Forging has a trailing yield of 3.1% on the current stock price of ₩7040. 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 Daechang Forging can afford its dividend, and if the dividend could grow.

See our latest analysis for Daechang Forging

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. Daechang Forging has a low and conservative payout ratio of just 22% of its income after tax. 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 15% of its free cash flow as dividends last year, which is conservatively low.

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 Daechang Forging 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. So we're not too excited that Daechang Forging's earnings are down 4.8% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Daechang Forging has delivered 16% dividend growth per year on average over the past 10 years.

Final Takeaway

Is Daechang Forging worth buying for its 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. Overall, it's hard to get excited about Daechang Forging from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 2 warning signs for Daechang Forging (1 is concerning) you should be aware of.

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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