Is It Worth Considering Zinus, Inc (KRX:013890) For Its Upcoming Dividend?

Readers hoping to buy Zinus, Inc (KRX:013890) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 10th of April.

Zinus's next dividend payment will be ₩1,250 per share, on the back of last year when the company paid a total of ₩1,250 to shareholders. Based on the last year's worth of payments, Zinus stock has a trailing yield of around 1.2% on the current share price of ₩101000. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Zinus

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. Zinus paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Zinus paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. Earnings per share are basically flat over the past 12 months. The best dividend stocks all grow their earnings per share over the long run, but it is hard to draw strong conclusions from any one year period.

Zinus also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

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

Final Takeaway

From a dividend perspective, should investors buy or avoid Zinus? It's disappointing to see earnings per share have fallen slightly, even though Zinus is paying out less than half its income as dividends. It's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. It's not that we think Zinus is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering Zinus as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 3 warning signs for Zinus (2 can't be ignored!) that you ought to be aware of before buying the shares.

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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