Stock Analysis

Read This Before Considering Dong Suh Companies Inc. (KRX:026960) For Its Upcoming ₩700 Dividend

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It looks like Dong Suh Companies Inc. (KRX:026960) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 4th of March.

Dong Suh Companies's next dividend payment will be ₩700 per share, on the back of last year when the company paid a total of ₩700 to shareholders. Last year's total dividend payments show that Dong Suh Companies has a trailing yield of 2.2% on the current share price of ₩32000. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Dong Suh Companies can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Dong Suh Companies

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. Fortunately Dong Suh Companies's payout ratio is modest, at just 50% of profit. A useful secondary check can be to evaluate whether Dong Suh Companies generated enough free cash flow to afford its dividend. It paid out 87% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 Dong Suh Companies paid out over the last 12 months.

KOSE:A026960 Historic Dividend December 25th 2020

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not encouraging to see that Dong Suh Companies's earnings are effectively flat 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. A high payout ratio of 50% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Dong Suh Companies could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Dong Suh Companies has delivered an average of 8.5% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Is Dong Suh Companies worth buying for its dividend? Dong Suh Companies has struggled to grow earnings per share, and it's paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. Overall, it's hard to get excited about Dong Suh Companies from a dividend perspective.

Keen to explore more data on Dong Suh Companies's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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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