Daesung Holdings Co., Ltd. (KRX:016710) Passed Our Checks, And It's About To Pay A ₩250 Dividend

It looks like Daesung Holdings Co., Ltd. (KRX:016710) is about to go ex-dividend in the next four days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 22nd of April.

Daesung Holdings's next dividend payment will be ₩250 per share, on the back of last year when the company paid a total of ₩250 to shareholders. Based on the last year's worth of payments, Daesung Holdings has a trailing yield of 1.0% on the current stock price of ₩24300. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Daesung Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Daesung Holdings has a low and conservative payout ratio of just 8.8% of its income after tax. A useful secondary check can be to evaluate whether Daesung Holdings generated enough free cash flow to afford its dividend. It paid out 79% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Daesung Holdings'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 Daesung Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Daesung Holdings's earnings per share have risen 19% per annum over the last five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Daesung Holdings has increased its dividend at approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Daesung Holdings is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid Daesung Holdings? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

So while Daesung Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Daesung Holdings and understanding them should be part of your investment process.

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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