Here's Why We're Wary Of Buying Woojin I&S' (KRX:010400) For Its Upcoming Dividend

Readers hoping to buy Woojin I&S Co., Ltd. (KRX:010400) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 13th of April.

Woojin I&S's next dividend payment will be ₩250 per share, and in the last 12 months, the company paid a total of ₩250 per share. Based on the last year's worth of payments, Woojin I&S has a trailing yield of 3.1% on the current stock price of ₩8120. If you buy this business for its dividend, you should have an idea of whether Woojin I&S's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Woojin I&S

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. Woojin I&S 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 Woojin I&S 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. It paid out 91% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.

Click here to see how much of its profit Woojin I&S paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Woojin I&S 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.

Given that Woojin I&S has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Get our latest analysis on Woojin I&S's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Woojin I&S? It's hard to get used to Woojin I&S paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

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 Woojin I&S. Every company has risks, and we've spotted 3 warning signs for Woojin I&S (of which 1 shouldn't be ignored!) 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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