Here's What We Like About Daesang Holdings' (KRX:084690) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Daesang Holdings Co., Ltd. (KRX:084690) is about to trade ex-dividend in the next three 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.

Daesang Holdings's upcoming dividend is ₩200 a share, following on from the last 12 months, when the company distributed a total of ₩200 per share to shareholders. Looking at the last 12 months of distributions, Daesang Holdings has a trailing yield of approximately 2.0% on its current stock price of ₩10250. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Daesang Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Daesang Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Daesang Holdings paid out just 6.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Fortunately, it paid out only 28% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Daesang Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Daesang Holdings's earnings have been skyrocketing, up 27% per annum for the past five years. Daesang Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Daesang Holdings has lifted its dividend by approximately 2.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Daesang Holdings is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Daesang Holdings? We love that Daesang Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

So while Daesang Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Daesang Holdings that we strongly recommend you have a look at before investing in the company.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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