Is DB Insurance Co., Ltd. (KRX:005830) A Smart Choice For Dividend Investors?

Today we'll take a closer look at DB Insurance Co., Ltd. (KRX:005830) 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. 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.

In this case, DB Insurance likely looks attractive to investors, given its 3.9% dividend yield and a payment history of over ten years. We'd guess that plenty of investors have purchased it for the income. The company also bought back stock during the year, equivalent to approximately 5.3% of the company's market capitalisation at the time. Some simple analysis can reduce the risk of holding DB Insurance for its dividend, and we'll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on DB Insurance!

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. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. In the last year, DB Insurance paid out 17% of its profit as dividends. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.

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

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. For the purpose of this article, we only scrutinise the last decade of DB Insurance's dividend payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past 10-year period, the first annual payment was ₩750 in 2011, compared to ₩1.5k last year. Dividends per share have grown at approximately 7.2% per year over this time.

Businesses that can grow their dividends at a decent rate and maintain a stable payout can generate substantial wealth for shareholders over the long term.

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. Earnings have grown at around 5.1% a year for the past five years, which is better than seeing them shrink! With a decent amount of growth and a low payout ratio, we think this bodes well for DB Insurance's prospects of growing its dividend payments in the future.

Conclusion

To summarise, shareholders should always check that DB Insurance'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 DB Insurance has a low payout ratio, as this suggests earnings are being reinvested in the business. Earnings growth has been limited, but we like that the dividend payments have been fairly consistent. DB Insurance has a number of positive attributes, but falls short of our ideal dividend company. It may be worth a look at the right price, though.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for DB Insurance for free with public analyst estimates for the company.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 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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