Just Three Days Till Dongsung Corporation (KRX:102260) Will Be Trading Ex-Dividend

It looks like Dongsung Corporation (KRX:102260) is about to go ex-dividend in the next three days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 22nd of April.

Dongsung's upcoming dividend is ₩200 a share, following on from the last 12 months, when the company distributed a total of ₩200 per share to shareholders. Looking at the last 12 months of distributions, Dongsung has a trailing yield of approximately 4.0% on its current stock price of ₩5000. If you buy this business for its dividend, you should have an idea of whether Dongsung's dividend is reliable and sustainable. As a result, readers should always check whether Dongsung has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Dongsung

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 77% 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. The good news is it paid out just 20% of its free cash flow in the last year.

It's positive to see that Dongsung'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 Dongsung 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Dongsung earnings per share are up 5.0% per annum over the last five years. Decent historical earnings per share growth suggests Dongsung has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

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

The Bottom Line

Is Dongsung worth buying for its dividend? While earnings per share growth has been modest, Dongsung's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. To summarise, Dongsung looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Dongsung for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Dongsung (1 is significant!) that deserve your attention before investing in 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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