Don't Race Out To Buy Yoosung Enterprise Co., Ltd. (KRX:002920) Just Because It's Going Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Yoosung Enterprise Co., Ltd. (KRX:002920) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Yoosung Enterprise investors that purchase the stock on or after the 27th of December will not receive the dividend, which will be paid on the 11th of April.

The company's next dividend payment will be ₩60.00 per share. Last year, in total, the company distributed ₩60.00 to shareholders. Based on the last year's worth of payments, Yoosung Enterprise stock has a trailing yield of around 3.2% on the current share price of ₩1896.00. If you buy this business for its dividend, you should have an idea of whether Yoosung Enterprise's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Yoosung Enterprise

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Yoosung Enterprise 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. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Yoosung Enterprise 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 Yoosung Enterprise paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Yoosung Enterprise was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Yoosung Enterprise's dividend payments per share have declined at 9.7% per year on average over the past five years, which is uninspiring. 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.

Get our latest analysis on Yoosung Enterprise's balance sheet health here.

To Sum It Up

Is Yoosung Enterprise an attractive dividend stock, or better left on the shelf? It's hard to get used to Yoosung Enterprise paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Yoosung Enterprise has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in Yoosung Enterprise despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 3 warning signs for Yoosung Enterprise (of which 1 is concerning!) you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.