Read This Before Considering Dong Suh Companies Inc. (KRX:026960) For Its Upcoming ₩780.00 Dividend

Dong Suh Companies Inc. (KRX:026960) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Dong Suh Companies' shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 6th of March.

The company's next dividend payment will be ₩780.00 per share, on the back of last year when the company paid a total of ₩780 to shareholders. Based on the last year's worth of payments, Dong Suh Companies stock has a trailing yield of around 2.8% on the current share price of ₩27900.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Dong Suh Companies has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Dong Suh Companies

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Dong Suh Companies's payout ratio is modest, at just 47% of profit. 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. Dividends consumed 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Dong Suh Companies, with earnings per share up 6.9% on average over the last five years. Decent historical earnings per share growth suggests Dong Suh Companies has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Dong Suh Companies has delivered 1.6% dividend growth per year on average over the past seven years.

Final Takeaway

Should investors buy Dong Suh Companies for the upcoming dividend? Earnings per share have been growing at a steady rate, and Dong Suh Companies paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Dong Suh Companies has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Dong Suh Companies has 1 warning sign we think you should be aware of.

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.