Be Sure To Check Out DY Power Corporation (KRX:210540) Before It Goes Ex-Dividend

Readers hoping to buy DY Power Corporation (KRX:210540) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, DY Power investors that purchase the stock on or after the 19th of March will not receive the dividend, which will be paid on the 14th of April.

The company's upcoming dividend is ₩350.00 a share, following on from the last 12 months, when the company distributed a total of ₩400 per share to shareholders. Looking at the last 12 months of distributions, DY Power has a trailing yield of approximately 3.2% on its current stock price of ₩12390.00. 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 DY Power can afford its dividend, and if the dividend could grow.

See our latest analysis for DY Power

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. DY Power is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Luckily it paid out just 16% of its free cash flow last year.

It's positive to see that DY Power'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 DY Power 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see DY Power earnings per share are up 2.8% per annum over the last five years. DY Power is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. DY Power has delivered an average of 15% per year annual increase in its dividend, based on the past five years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid DY Power? Earnings per share growth has been growing somewhat, and DY Power 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 DY Power is halfway there. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks DY Power is facing. Case in point: We've spotted 2 warning signs for DY Power you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.