We Wouldn't Be Too Quick To Buy Nam Hwa Construction Co.,Ltd (KOSDAQ:091590) Before It Goes Ex-Dividend

Nam Hwa Construction Co.,Ltd (KOSDAQ:091590) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Nam Hwa ConstructionLtd's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 23rd of April.

The company's upcoming dividend is ₩50.00 a share, following on from the last 12 months, when the company distributed a total of ₩50.00 per share to shareholders. Based on the last year's worth of payments, Nam Hwa ConstructionLtd stock has a trailing yield of around 1.1% on the current share price of ₩4350.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Nam Hwa ConstructionLtd

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. Nam Hwa ConstructionLtd 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. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. 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. Luckily it paid out just 7.0% of its free cash flow last year.

Click here to see how much of its profit Nam Hwa ConstructionLtd paid out over the last 12 months.

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. Nam Hwa ConstructionLtd 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nam Hwa ConstructionLtd has seen its dividend decline 6.5% per annum on average over the past five years, which is not great to see. 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 Nam Hwa ConstructionLtd's balance sheet health here.

To Sum It Up

Is Nam Hwa ConstructionLtd worth buying for its dividend? It's hard to get used to Nam Hwa ConstructionLtd 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 that we think Nam Hwa ConstructionLtd is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

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 Nam Hwa ConstructionLtd. Our analysis shows 2 warning signs for Nam Hwa ConstructionLtd that we strongly recommend you have a look at before investing in the company.

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.