Dividend Investors: Don't Be Too Quick To Buy SPC Samlip Co., Ltd. (KRX:005610) For Its Upcoming Dividend

Readers hoping to buy SPC Samlip Co., Ltd. (KRX:005610) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 13th of April.

SPC Samlip's next dividend payment will be ₩1,104 per share, and in the last 12 months, the company paid a total of ₩1,104 per share. Calculating the last year's worth of payments shows that SPC Samlip has a trailing yield of 1.6% on the current share price of ₩71200. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for SPC Samlip

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. SPC Samlip 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 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. Luckily it paid out just 19% of its free cash flow last year.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. SPC Samlip 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. SPC Samlip has delivered 11% dividend growth per year on average over the past 10 years.

Get our latest analysis on SPC Samlip's balance sheet health here.

Final Takeaway

Has SPC Samlip got what it takes to maintain its dividend payments? 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 the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

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 SPC Samlip. Be aware that SPC Samlip is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...

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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