How Does Mirae Asset Securities Co., Ltd. (KRX:006800) Stand Up To These Simple Dividend Safety Checks?

Today we'll take a closer look at Mirae Asset Securities Co., Ltd. (KRX:006800) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

While Mirae Asset Securities's 2.6% dividend yield is not the highest, we think its lengthy payment history is quite interesting. The company also bought back stock equivalent to around 6.6% of market capitalisation this year. There are a few simple ways to reduce the risks of buying Mirae Asset Securities for its dividend, and we'll go through these below.

Click the interactive chart for our full dividend analysis

Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Looking at the data, we can see that 21% of Mirae Asset Securities' profits were paid out as dividends in the last 12 months. Given the low payout ratio, it is hard to envision the dividend coming under threat, barring a catastrophe.

We update our data on Mirae Asset Securities 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 Securities' 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 Securities' dividend hasn't shrunk linearly at 6.3% per annum, but the CAGR is a useful estimate of the historical rate of change.

A shrinking dividend over a 10-year period is not ideal, and we'd be concerned about investing in a dividend stock that lacks a solid record of growing dividends per share.

Dividend Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings have grown at around 8.2% a year for the past five years, which is better than seeing them shrink! A low payout ratio and strong historical earnings growth suggests Mirae Asset Securities has been effectively reinvesting in its business. We think this generally bodes well for its dividend prospects.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. We're glad to see Mirae Asset Securities has a low payout ratio, as this suggests earnings are being reinvested in the business. Next, earnings growth has been good, but unfortunately the dividend has been cut at least once in the past. Mirae Asset Securities has a credible record on several fronts, but falls slightly short of our standards for a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come accross 4 warning signs for Mirae Asset Securities you should be aware of, and 2 of them are a bit concerning.

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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