Just Four Days Till DaeChang Steel Co., Ltd. (KOSDAQ:140520) Will Be Trading Ex-Dividend

It looks like DaeChang Steel Co., Ltd. (KOSDAQ:140520) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase DaeChang Steel's shares before the 27th of December in order to receive the dividend, which the company will pay on the 28th of April.

The company's upcoming dividend is ₩150.00 a share, following on from the last 12 months, when the company distributed a total of ₩150 per share to shareholders. Looking at the last 12 months of distributions, DaeChang Steel has a trailing yield of approximately 6.9% on its current stock price of ₩2160.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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 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. DaeChang Steel lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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 distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. DaeChang Steel reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, five years ago, DaeChang Steel has lifted its dividend by approximately 8.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Remember, you can always get a snapshot of DaeChang Steel's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

From a dividend perspective, should investors buy or avoid DaeChang Steel? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in DaeChang Steel for the dividends alone, you should always be mindful of the risks involved. For example - DaeChang Steel has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.