How Does INZI Controls Co.,Ltd. (KRX:023800) Fare As A Dividend Stock?

Dividend paying stocks like INZI Controls Co.,Ltd. (KRX:023800) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

While INZI ControlsLtd's 0.5% dividend yield is not the highest, we think its lengthy payment history is quite interesting. Remember though, due to the recent spike in its share price, INZI ControlsLtd's yield will look lower, even though the market may now be factoring in an improvement in its long-term prospects. Some simple analysis can reduce the risk of holding INZI ControlsLtd for its dividend, and we'll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on INZI ControlsLtd!

Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Although it reported a loss over the past 12 months, INZI ControlsLtd currently pays a dividend. When a company recently reported a loss, we should investigate if its cash flows covered the dividend.

Unfortunately, while INZI ControlsLtd pays a dividend, it also reported negative free cash flow last year. While there may be a good reason for this, it's not ideal from a dividend perspective.

Remember, you can always get a snapshot of INZI ControlsLtd's latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. INZI ControlsLtd has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. During this period the dividend has been stable, which could imply the business could have relatively consistent earnings power. Its most recent annual dividend was ₩100 per share, effectively flat on its first payment 10 years ago.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. INZI ControlsLtd's EPS have fallen by approximately 66% per year during the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and INZI ControlsLtd's earnings per share, which support the dividend, have been anything but stable.

Conclusion

To summarise, shareholders should always check that INZI ControlsLtd's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. INZI ControlsLtd's dividend is not well covered by free cash flow, plus it paid a dividend while being unprofitable. It's not great to see earnings per share shrinking. The dividends have been relatively consistent, but we wonder for how much longer this will be true. Using these criteria, INZI ControlsLtd looks quite suboptimal from a dividend investment perspective.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come accross 3 warning signs for INZI ControlsLtd you should be aware of, and 2 of them are potentially serious.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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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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