Is It Worth Considering Eagon Industrial Co., Ltd. (KRX:008250) For Its Upcoming 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 Eagon Industrial Co., Ltd. (KRX:008250) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 22nd of April.

Eagon Industrial's next dividend payment will be ₩200 per share, on the back of last year when the company paid a total of ₩200 to shareholders. Based on the last year's worth of payments, Eagon Industrial stock has a trailing yield of around 2.0% on the current share price of ₩9850. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Eagon Industrial

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. Its dividend payout ratio is 86% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.

It's positive to see that Eagon Industrial's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Eagon Industrial 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Eagon Industrial's earnings per share have dropped 29% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Given that Eagon Industrial has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Eagon Industrial worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, it's hard to get excited about Eagon Industrial from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Eagon Industrial, you should know about the other risks facing this business. Every company has risks, and we've spotted 5 warning signs for Eagon Industrial (of which 2 are significant!) you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

When trading Eagon Industrial or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.