Here's What We Like About Daewon Pharmaceutical's (KRX:003220) Upcoming Dividend

It looks like Daewon Pharmaceutical Co., Ltd. (KRX:003220) is about to go ex-dividend in the next 4 days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 17th of April.

Daewon Pharmaceutical's upcoming dividend is ₩252 a share, following on from the last 12 months, when the company distributed a total of ₩252 per share to shareholders. Calculating the last year's worth of payments shows that Daewon Pharmaceutical has a trailing yield of 1.3% on the current share price of ₩19350. If you buy this business for its dividend, you should have an idea of whether Daewon Pharmaceutical's dividend is reliable and sustainable. So we need to investigate whether Daewon Pharmaceutical can afford its dividend, and if the dividend could grow.

See our latest analysis for Daewon Pharmaceutical

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. Daewon Pharmaceutical has a low and conservative payout ratio of just 21% of its income after tax. 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. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Daewon Pharmaceutical'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 Daewon Pharmaceutical 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Daewon Pharmaceutical earnings per share are up 8.6% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Daewon Pharmaceutical has increased its dividend at approximately 8.3% 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.

Final Takeaway

Has Daewon Pharmaceutical got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Daewon Pharmaceutical is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Daewon Pharmaceutical is halfway there. It's a promising combination that should mark this company worthy of closer attention.

Curious about whether Daewon Pharmaceutical has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.

If you decide to trade Daewon Pharmaceutical, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all 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.