Jinro Distillers Co., Ltd. (KOSDAQ:018120) Pays A ₩650.00 Dividend In Just Three Days

It looks like Jinro Distillers Co., Ltd. (KOSDAQ:018120) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Jinro Distillers' shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 7th of April.

The company's next dividend payment will be ₩650.00 per share. Last year, in total, the company distributed ₩650 to shareholders. Last year's total dividend payments show that Jinro Distillers has a trailing yield of 3.8% on the current share price of ₩17280.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Jinro Distillers

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. Jinro Distillers paid out a comfortable 44% of its profit last year. A useful secondary check can be to evaluate whether Jinro Distillers generated enough free cash flow to afford its dividend. It paid out 107% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Jinro Distillers does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Jinro Distillers paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Jinro Distillers to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Jinro Distillers 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. That's why it's not ideal to see Jinro Distillers's earnings per share have been shrinking at 4.4% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Jinro Distillers's dividend payments per share have declined at 12% per year on average over the past five years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Jinro Distillers worth buying for its dividend? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though Jinro Distillers is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Jinro Distillers.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Jinro Distillers. We've identified 3 warning signs with Jinro Distillers (at least 1 which doesn't sit too well with us), and understanding these should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.