We Wouldn't Be Too Quick To Buy INFAC Corporation (KRX:023810) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see INFAC Corporation (KRX:023810) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 29th of April.

INFAC's upcoming dividend is ₩120 a share, following on from the last 12 months, when the company distributed a total of ₩120 per share to shareholders. Last year's total dividend payments show that INFAC has a trailing yield of 2.0% on the current share price of ₩5990. 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 investigate whether INFAC can afford its dividend, and if the dividend could grow.

View our latest analysis for INFAC

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. INFAC reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If INFAC 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 10% of its free cash flow in the last year.

Click here to see how much of its profit INFAC 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. INFAC 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. In the past 10 years, INFAC has increased its dividend at approximately 7.2% a year on average.

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

Final Takeaway

Has INFAC got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of INFAC.

So if you're still interested in INFAC despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, INFAC has 5 warning signs (and 2 which are a bit concerning) we think you should know about.

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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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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