It Might Not Be A Great Idea To Buy DaeChang Steel Co., Ltd. (KOSDAQ:140520) For Its Next Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that DaeChang Steel Co., Ltd. (KOSDAQ:140520) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 24th of April.

DaeChang Steel's next dividend payment will be ₩100.00 per share, and in the last 12 months, the company paid a total of ₩100.00 per share. Calculating the last year's worth of payments shows that DaeChang Steel has a trailing yield of 4.0% on the current share price of ₩2470. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether DaeChang Steel has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for DaeChang Steel

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. DaeChang Steel reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If DaeChang Steel didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 9.0% of its free cash flow as dividends last year, which is conservatively low.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. DaeChang Steel reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Unfortunately DaeChang Steel has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

We update our analysis on DaeChang Steel every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid DaeChang Steel? It's hard to get used to DaeChang Steel paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of DaeChang Steel.

So if you're still interested in DaeChang Steel despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To help with this, we've discovered 4 warning signs for DaeChang Steel (1 is potentially serious!) that you ought to be aware of before buying the shares.

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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