Just Three Days Till Dong Suh Companies Inc. (KRX:026960) Will Be Trading Ex-Dividend

Dong Suh Companies Inc. (KRX:026960) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Dong Suh Companies' shares on or after the 28th of August, you won't be eligible to receive the dividend, when it is paid on the 19th of September.

The company's upcoming dividend is ₩250.00 a share, following on from the last 12 months, when the company distributed a total of ₩890 per share to shareholders. Based on the last year's worth of payments, Dong Suh Companies has a trailing yield of 3.3% on the current stock price of ₩27200.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Dong Suh Companies can afford its dividend, and if the dividend could grow.

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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. Dong Suh Companies paid out 62% of its earnings to investors last year, a normal payout level for most businesses. 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. The company paid out 93% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While Dong Suh Companies's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Dong Suh Companies to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Check out our latest analysis for Dong Suh Companies

Click here to see how much of its profit Dong Suh Companies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Dong Suh Companies's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Dong Suh Companies has delivered 3.5% dividend growth per year on average over the past seven years.

The Bottom Line

Has Dong Suh Companies got what it takes to maintain its dividend payments? In addition to earnings being flat, Dong Suh Companies is paying out a reasonable percentage of its earnings as profits. However, the dividend was not well covered by free cash flow. It's not that we think Dong Suh Companies is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Dong Suh Companies. In terms of investment risks, we've identified 1 warning sign with Dong Suh Companies and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.