Is It Smart To Buy Douzone Bizon Co., Ltd. (KRX:012510) Before It Goes Ex-Dividend?

Douzone Bizon Co., Ltd. (KRX:012510) is about to trade 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 23rd of April.

Douzone Bizon's next dividend payment will be ₩470 per share, and in the last 12 months, the company paid a total of ₩470 per share. Last year's total dividend payments show that Douzone Bizon has a trailing yield of 0.5% on the current share price of ₩104000. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Douzone Bizon has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Douzone Bizon

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Douzone Bizon paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Douzone Bizon generated enough free cash flow to afford its dividend. It paid out 92% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While Douzone Bizon's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Douzone Bizon to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Douzone Bizon's earnings have been skyrocketing, up 32% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Unfortunately Douzone Bizon 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 Douzone Bizon got what it takes to maintain its dividend payments? We like that Douzone Bizon has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. To summarise, Douzone Bizon looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Douzone Bizon looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Douzone Bizon and you should be aware of this before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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