Read This Before Considering MegaMD Co., Ltd. (KOSDAQ:133750) For Its Upcoming ₩50.00 Dividend

MegaMD Co., Ltd. (KOSDAQ:133750) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 10th of April.

MegaMD's upcoming dividend is ₩50.00 a share, following on from the last 12 months, when the company distributed a total of ₩50.00 per share to shareholders. Looking at the last 12 months of distributions, MegaMD has a trailing yield of approximately 1.2% on its current stock price of ₩4140. If you buy this business for its dividend, you should have an idea of whether MegaMD's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for MegaMD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MegaMD paid out a comfortable 28% of its profit last year. A useful secondary check can be to evaluate whether MegaMD generated enough free cash flow to afford its dividend. Luckily it paid out just 8.3% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit MegaMD 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 earnings fall far enough, the company could be forced to cut its dividend. MegaMD's earnings per share have fallen at approximately 7.3% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

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

The Bottom Line

From a dividend perspective, should investors buy or avoid MegaMD? MegaMD has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 4 warning signs for MegaMD (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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