We Wouldn't Be Too Quick To Buy Dongkuk Holdings Co.,Ltd. (KRX:001230) Before It Goes Ex-Dividend

Dongkuk Holdings Co.,Ltd. (KRX:001230) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Dongkuk HoldingsLtd's shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 1st of September.

The company's next dividend payment will be ₩100.00 per share. Last year, in total, the company distributed ₩500 to shareholders. Looking at the last 12 months of distributions, Dongkuk HoldingsLtd has a trailing yield of approximately 6.0% on its current stock price of ₩8370.00. If you buy this business for its dividend, you should have an idea of whether Dongkuk HoldingsLtd's dividend is reliable and sustainable. So we need to investigate whether Dongkuk HoldingsLtd can afford its dividend, and if the dividend could grow.

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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. Dongkuk HoldingsLtd paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out more than half (51%) of its free cash flow in the past year, which is within an average range for most companies.

View our latest analysis for Dongkuk HoldingsLtd

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Dongkuk HoldingsLtd 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Dongkuk HoldingsLtd has seen its dividend decline 20% per annum on average over the past four years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

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

The Bottom Line

Is Dongkuk HoldingsLtd an attractive dividend stock, or better left on the shelf? It's hard to get used to Dongkuk HoldingsLtd paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

So if you're still interested in Dongkuk HoldingsLtd despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. In terms of investment risks, we've identified 1 warning sign with Dongkuk HoldingsLtd and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.