We Wouldn't Be Too Quick To Buy Mando Corporation (KRX:204320) Before It Goes Ex-Dividend

Readers hoping to buy Mando Corporation (KRX:204320) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 17th of April.

Mando's next dividend payment will be ₩550 per share, on the back of last year when the company paid a total of ₩550 to shareholders. Looking at the last 12 months of distributions, Mando has a trailing yield of approximately 0.9% on its current stock price of ₩58100. If you buy this business for its dividend, you should have an idea of whether Mando's dividend is reliable and sustainable. As a result, readers should always check whether Mando has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Mando

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mando'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. 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 Mando 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 23% of its free cash flow in the last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Mando 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Mando has seen its dividend decline 11% per annum on average over the past five years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

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

To Sum It Up

Should investors buy Mando for the upcoming dividend? It's hard to get used to Mando 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.

So if you're still interested in Mando despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, Mando has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

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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