Don't Buy NVH Korea Inc. (KOSDAQ:067570) For Its Next Dividend Without Doing These Checks

NVH Korea Inc. (KOSDAQ:067570) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 24th of April.

NVH Korea's next dividend payment will be ₩50.00 per share. Last year, in total, the company distributed ₩50.00 to shareholders. Based on the last year's worth of payments, NVH Korea has a trailing yield of 1.3% on the current stock price of ₩3800. If you buy this business for its dividend, you should have an idea of whether NVH Korea's dividend is reliable and sustainable. So we need to investigate whether NVH Korea can afford its dividend, and if the dividend could grow.

See our latest analysis for NVH Korea

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. NVH Korea's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 5.7% of its cash flow last year.

Click here to see how much of its profit NVH Korea paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. NVH Korea 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.

Unfortunately NVH Korea has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

We update our analysis on NVH Korea every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is NVH Korea an attractive dividend stock, or better left on the shelf? It's hard to get used to NVH Korea paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

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 NVH Korea. For instance, we've identified 5 warning signs for NVH Korea (2 are a bit unpleasant) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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