It Might Not Be A Great Idea To Buy BAIKSAN Co,. Ltd (KRX:035150) For Its Next Dividend

It looks like BAIKSAN Co,. Ltd (KRX:035150) is about to go ex-dividend in the next three days. 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 8th of April.

BAIKSAN Co's next dividend payment will be ₩100.00 per share. Last year, in total, the company distributed ₩100.00 to shareholders. Last year's total dividend payments show that BAIKSAN Co has a trailing yield of 1.9% on the current share price of ₩5180. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether BAIKSAN Co has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for BAIKSAN Co

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. BAIKSAN Co reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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. The good news is it paid out just 23% of its free cash flow in the last year.

Click here to see how much of its profit BAIKSAN Co paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. BAIKSAN Co 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BAIKSAN Co's dividend payments are broadly unchanged compared to where they were two years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Get our latest analysis on BAIKSAN Co's balance sheet health here.

Final Takeaway

Is BAIKSAN Co worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not that we think BAIKSAN Co is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that in mind though, if the poor dividend characteristics of BAIKSAN Co don't faze you, it's worth being mindful of the risks involved with this business. For example, BAIKSAN Co has 3 warning signs (and 2 which don't sit too well with us) 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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