Here's Why We're Wary Of Buying Jindo.Co's (KRX:088790) For Its Upcoming Dividend

It looks like Jindo.Co., Ltd. (KRX:088790) 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 28th of April.

Jindo.Co's upcoming dividend is ₩100.00 a share, following on from the last 12 months, when the company distributed a total of ₩100.00 per share to shareholders. Looking at the last 12 months of distributions, Jindo.Co has a trailing yield of approximately 2.5% on its current stock price of ₩3980. 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 Jindo.Co has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Jindo.Co

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Jindo.Co paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Jindo.Co 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. The good news is it paid out just 9.8% of its free cash flow in the last year.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Jindo.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.

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

Remember, you can always get a snapshot of Jindo.Co's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Should investors buy Jindo.Co for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Jindo.Co is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Jindo.Co despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 4 warning signs for Jindo.Co (of which 1 can't be ignored!) 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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