Stock Analysis

Here's Why We're Wary Of Buying DREAMTECH's (KRX:192650) For Its Upcoming Dividend

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It looks like DREAMTECH Co., Ltd. (KRX:192650) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 22nd of April.

DREAMTECH's upcoming dividend is ₩160 a share, following on from the last 12 months, when the company distributed a total of ₩160 per share to shareholders. Based on the last year's worth of payments, DREAMTECH has a trailing yield of 1.4% on the current stock price of ₩11050. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for DREAMTECH

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DREAMTECH paid out 58% of its earnings to investors last year, a normal payout level for most businesses. 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. 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 DREAMTECH'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 DREAMTECH paid out over the last 12 months.

KOSE:A192650 Historic Dividend December 24th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. From this viewpoint, it's unfortunate that earnings per share have declined 13% over the last year.

Given that DREAMTECH has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Is DREAMTECH worth buying for its dividend? While earnings per share are shrinking, it's encouraging to see that at least DREAMTECH's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of DREAMTECH.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with DREAMTECH. Case in point: We've spotted 4 warning signs for DREAMTECH 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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Valuation is complex, but we're helping make it simple.

Find out whether DREAMTECH is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About KOSE:A192650


DREAMTECH Co., Ltd. designs, develops, produces, and sells modules for smartphone, automotive LED, home appliance, fingerprint, sensor, IT convergence, and medical/ healthcare applications in South Korea and internationally.

Excellent balance sheet and good value.

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