Should You Buy Dongwon Systems Corporation (KRX:014820) For Its Upcoming Dividend?

It looks like Dongwon Systems Corporation (KRX:014820) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 21st of April.

Dongwon Systems's next dividend payment will be ₩500 per share, and in the last 12 months, the company paid a total of ₩500 per share. Last year's total dividend payments show that Dongwon Systems has a trailing yield of 1.5% on the current share price of ₩33050. 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 Dongwon Systems has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Dongwon Systems

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. Fortunately Dongwon Systems's payout ratio is modest, at just 29% of profit. 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. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Dongwon Systems'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 Dongwon Systems paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Dongwon Systems's earnings have been skyrocketing, up 79% per annum for the past five years.

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

Final Takeaway

Is Dongwon Systems an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Dongwon Systems, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Dongwon Systems is facing. For example, we've found 3 warning signs for Dongwon Systems that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top 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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