Be Sure To Check Out Digital Daesung Co., Ltd. (KOSDAQ:068930) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Digital Daesung Co., Ltd. (KOSDAQ:068930) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 3rd of April.

Digital Daesung's next dividend payment will be ₩300 per share. Last year, in total, the company distributed ₩300 to shareholders. Based on the last year's worth of payments, Digital Daesung stock has a trailing yield of around 3.6% on the current share price of ₩8340. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Digital Daesung

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Digital Daesung paid out 51% 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. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Digital Daesung'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 Digital Daesung 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Digital Daesung's earnings per share have risen 17% per annum over the last five years. Digital Daesung is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Unfortunately Digital Daesung has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Should investors buy Digital Daesung for the upcoming dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Digital Daesung is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Digital Daesung's dividend merits.

So while Digital Daesung looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Digital Daesung you should know about.

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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