Does Mirae Asset Daewoo Co., Ltd. (KRX:006800) Have A Place In Your Dividend Portfolio?

Is Mirae Asset Daewoo Co., Ltd. (KRX:006800) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. Unfortunately, it's common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.

A 2.6% yield is nothing to get excited about, but investors probably think the long payment history suggests Mirae Asset Daewoo has some staying power. The company also bought back stock equivalent to around 5.7% of market capitalisation this year. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.

Explore this interactive chart for our latest analysis on Mirae Asset Daewoo!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. 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. Mirae Asset Daewoo paid out 35% of its profit as dividends, over the trailing twelve month period. This is a medium payout level that leaves enough capital in the business to fund opportunities that might arise, while also rewarding shareholders. Plus, there is room to increase the payout ratio over time.

We update our data on Mirae Asset Daewoo every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. For the purpose of this article, we only scrutinise the last decade of Mirae Asset Daewoo's dividend payments. The dividend has been cut on at least one occasion historically. During the past 10-year period, the first annual payment was ₩500 in 2011, compared to ₩260 last year. The dividend has shrunk at around 6.3% a year during that period. Mirae Asset Daewoo's dividend hasn't shrunk linearly at 6.3% per annum, but the CAGR is a useful estimate of the historical rate of change.

We struggle to make a case for buying Mirae Asset Daewoo for its dividend, given that payments have shrunk over the past 10 years.

Dividend Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. It's not great to see that Mirae Asset Daewoo's have fallen at approximately 3.3% over the past five years. A modest decline in earnings per share is not great to see, but it doesn't automatically make a dividend unsustainable. Still, we'd vastly prefer to see EPS growth when researching dividend stocks.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. Firstly, we like that Mirae Asset Daewoo has a low and conservative payout ratio. Earnings per share are down, and Mirae Asset Daewoo's dividend has been cut at least once in the past, which is disappointing. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Mirae Asset Daewoo out there.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Mirae Asset Daewoo (1 makes us a bit uncomfortable!) that you should be aware of before investing.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding 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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