DongWon Development Co.,Ltd. (KOSDAQ:013120) Pays A ₩80.00 Dividend In Just Three Days

DongWon Development Co.,Ltd. (KOSDAQ:013120) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase DongWon DevelopmentLtd's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 28th of April.

The company's next dividend payment will be ₩80.00 per share, and in the last 12 months, the company paid a total of ₩80.00 per share. Based on the last year's worth of payments, DongWon DevelopmentLtd stock has a trailing yield of around 3.4% on the current share price of ₩2385.00. 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 investigate whether DongWon DevelopmentLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for DongWon DevelopmentLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 75% 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. A useful secondary check can be to evaluate whether DongWon DevelopmentLtd generated enough free cash flow to afford its dividend. The good news is it paid out just 21% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit DongWon DevelopmentLtd 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. DongWon DevelopmentLtd's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 42% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DongWon DevelopmentLtd's dividend payments per share have declined at 17% per year on average over the past four years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is DongWon DevelopmentLtd worth buying for its dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. To summarise, DongWon DevelopmentLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about DongWon DevelopmentLtd's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 4 warning signs for DongWon DevelopmentLtd (1 is significant!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.