Why Eugene Investment & Securities Co.,Ltd. (KRX:001200) Is A Dividend Rockstar

Could Eugene Investment & Securities Co.,Ltd. (KRX:001200) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.

With only a two-year payment history, and a 1.8% yield, investors probably think Eugene Investment & SecuritiesLtd is not much of a dividend stock. Many of the best dividend stocks typically start out paying a low yield, so we wouldn't automatically cut it from our list of prospects. During the year, the company also conducted a buyback equivalent to around 1.5% of its market capitalisation. Some simple analysis can reduce the risk of holding Eugene Investment & SecuritiesLtd for its dividend, and we'll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on Eugene Investment & SecuritiesLtd!

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Looking at the data, we can see that 11% of Eugene Investment & SecuritiesLtd's profits were paid out as dividends in the last 12 months. With a low payout ratio, it looks like the dividend is comprehensively covered by earnings.

Consider getting our latest analysis on Eugene Investment & SecuritiesLtd's financial position here.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. The dividend has not fluctuated much, but with a relatively short payment history, we can't be sure this is sustainable across a full market cycle. During the past two-year period, the first annual payment was ₩60.0 in 2019, compared to ₩70.0 last year. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time.

The dividend has been growing at a reasonable rate, which we like. We're conscious though that one of the best ways to detect a multi-decade consistent dividend-payer, is to watch a company pay dividends for 20 years - a distinction Eugene Investment & SecuritiesLtd has not achieved yet.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. Eugene Investment & SecuritiesLtd has grown its earnings per share at 5.3% per annum over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Eugene Investment & SecuritiesLtd's prospects of growing its dividend payments in the future.

Conclusion

To summarise, shareholders should always check that Eugene Investment & SecuritiesLtd's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. We're glad to see Eugene Investment & SecuritiesLtd has a low payout ratio, as this suggests earnings are being reinvested in the business. Unfortunately, earnings growth has also been mediocre, and we think it has not been paying dividends long enough to demonstrate resilience across economic cycles. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Eugene Investment & SecuritiesLtd out there.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Eugene Investment & SecuritiesLtd has 3 warning signs (and 1 which is significant) we think you should know about.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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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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