Be Sure To Check Out Dong-A ST Co., Ltd. (KRX:170900) Before It Goes Ex-Dividend

Dong-A ST Co., Ltd. (KRX:170900) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 10th of April.

Dong-A ST's next dividend payment will be ₩1,000 per share. Last year, in total, the company distributed ₩1,000 to shareholders. Calculating the last year's worth of payments shows that Dong-A ST has a trailing yield of 1.2% on the current share price of ₩85100. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Dong-A ST

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. Dong-A ST paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Dong-A ST generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Dong-A ST'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 Dong-A ST 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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Dong-A ST earnings per share are up 9.1% per annum over the last five years. Decent historical earnings per share growth suggests Dong-A ST has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

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

The Bottom Line

Has Dong-A ST got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Dong-A ST paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy Dong-A ST today.

While it's tempting to invest in Dong-A ST for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Dong-A ST you should be aware of.

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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