Don't Race Out To Buy Sungwoo Hitech Co., Ltd. (KOSDAQ:015750) Just Because It's Going Ex-Dividend

Sungwoo Hitech Co., Ltd. (KOSDAQ:015750) stock is about to trade ex-dividend in four days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 14th of April.

Sungwoo Hitech's next dividend payment will be ₩80.00 per share. Last year, in total, the company distributed ₩80.00 to shareholders. Based on the last year's worth of payments, Sungwoo Hitech stock has a trailing yield of around 1.5% on the current share price of ₩5220. If you buy this business for its dividend, you should have an idea of whether Sungwoo Hitech's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Sungwoo Hitech

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sungwoo Hitech lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Sungwoo Hitech didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 14% of its free cash flow in the last year.

Click here to see how much of its profit Sungwoo Hitech 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. If earnings fall far enough, the company could be forced to cut its dividend. Sungwoo Hitech reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sungwoo Hitech has seen its dividend decline 2.2% per annum on average over the past 10 years, which is not great to see. 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.

Remember, you can always get a snapshot of Sungwoo Hitech's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Sungwoo Hitech an attractive dividend stock, or better left on the shelf? It's hard to get used to Sungwoo Hitech paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Sungwoo Hitech.

Although, if you're still interested in Sungwoo Hitech and want to know more, you'll find it very useful to know what risks this stock faces. For instance, we've identified 4 warning signs for Sungwoo Hitech (2 shouldn't be ignored) you should be aware of.

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.

If you decide to trade Sungwoo Hitech, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.