Here's What You Should Know About Intelligent Digital Integrated Security Co., Ltd.'s (KOSDAQ:143160) 0.8% Dividend Yield

Could Intelligent Digital Integrated Security Co., Ltd. (KOSDAQ:143160) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

With a 0.8% yield and a five-year payment history, investors probably think Intelligent Digital Integrated Security looks like a reliable dividend stock. A 0.8% yield is not inspiring, but the longer payment history has some appeal. Some simple analysis can reduce the risk of holding Intelligent Digital Integrated Security for its dividend, and we'll focus on the most important aspects below.

Click the interactive chart for our full dividend analysis

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Intelligent Digital Integrated Security paid out 17% of its profit as dividends, over the trailing twelve month period. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.

We also measure dividends paid against a company's levered free cash flow, to see if enough cash was generated to cover the dividend. Intelligent Digital Integrated Security paid out 24% of its free cash flow as dividends last year, which is conservative and suggests the dividend is sustainable. 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.

While the above analysis focuses on dividends relative to a company's earnings, we do note Intelligent Digital Integrated Security's strong net cash position, which will let it pay larger dividends for a time, should it choose.

Remember, you can always get a snapshot of Intelligent Digital Integrated Security's latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Intelligent Digital Integrated Security has been paying a dividend for the past five years. During the past five-year period, the first annual payment was ₩300 in 2016, compared to ₩250 last year. The dividend has shrunk at around 3.6% a year during that period.

We struggle to make a case for buying Intelligent Digital Integrated Security for its dividend, given that payments have shrunk over the past five years.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. Earnings have grown at around 2.8% a year for the past five years, which is better than seeing them shrink! Growth has been hard to come by. On the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. First, we like that the company's dividend payments appear well covered, although the retained capital also needs to be effectively reinvested. Second, earnings growth has been ordinary, and its history of dividend payments is shorter than we'd like. Intelligent Digital Integrated Security has a number of positive attributes, but it falls slightly short of our (admittedly high) standards. Were there evidence of a strong moat or an attractive valuation, it could still be well worth a look.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Intelligent Digital Integrated Security (1 doesn't sit too well with us!) that you should be aware of before investing.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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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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