Read This Before Considering Maeil Dairies Co., Ltd. (KOSDAQ:267980) For Its Upcoming ₩800 Dividend

It looks like Maeil Dairies Co., Ltd. (KOSDAQ:267980) is about to go 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 24th of April.

Maeil Dairies's upcoming dividend is ₩800 a share, following on from the last 12 months, when the company distributed a total of ₩800 per share to shareholders. Based on the last year's worth of payments, Maeil Dairies stock has a trailing yield of around 1.1% on the current share price of ₩69600. If you buy this business for its dividend, you should have an idea of whether Maeil Dairies's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Maeil Dairies

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. Maeil Dairies has a low and conservative payout ratio of just 11% of its income after tax. A useful secondary check can be to evaluate whether Maeil Dairies generated enough free cash flow to afford its dividend. It paid out 25% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Maeil Dairies'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 Maeil Dairies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. Earnings per share are basically flat over the past 12 months. The best dividend stocks all grow their earnings per share over the long run, but it is hard to draw strong conclusions from any one year period.

Given that Maeil Dairies has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Should investors buy Maeil Dairies for the upcoming dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Maeil Dairies today.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for Maeil Dairies you should be aware of.

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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