It Might Not Be A Great Idea To Buy Zero to Seven Inc. (KOSDAQ:159580) For Its Next Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Zero to Seven Inc. (KOSDAQ:159580) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Zero to Seven investors that purchase the stock on or after the 27th of December will not receive the dividend, which will be paid on the 14th of April.

The company's next dividend payment will be ₩50.00 per share, and in the last 12 months, the company paid a total of ₩50.00 per share. Looking at the last 12 months of distributions, Zero to Seven has a trailing yield of approximately 1.0% on its current stock price of ₩5250.00. If you buy this business for its dividend, you should have an idea of whether Zero to Seven's dividend is reliable and sustainable. As a result, readers should always check whether Zero to Seven has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Zero to Seven

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. Zero to Seven 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. 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 Zero to Seven 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.

Click here to see how much of its profit Zero to Seven 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Zero to Seven 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.

Unfortunately Zero to Seven has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Get our latest analysis on Zero to Seven's balance sheet health here.

The Bottom Line

Is Zero to Seven worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that in mind though, if the poor dividend characteristics of Zero to Seven don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Zero to Seven is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.