We Wouldn't Be Too Quick To Buy CROWNHAITAI Holdings Co.,Ltd. (KRX:005740) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that CROWNHAITAI Holdings Co.,Ltd. (KRX:005740) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 24th of April.

CROWNHAITAI HoldingsLtd's next dividend payment will be ₩100.00 per share, on the back of last year when the company paid a total of ₩100.00 to shareholders. Last year's total dividend payments show that CROWNHAITAI HoldingsLtd has a trailing yield of 1.1% on the current share price of ₩8870. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for CROWNHAITAI HoldingsLtd

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. CROWNHAITAI HoldingsLtd 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. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the 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 6.6% of its free cash flow last year.

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

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. CROWNHAITAI HoldingsLtd 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CROWNHAITAI HoldingsLtd's dividend payments per share have declined at 4.1% per year on average over the past 10 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.

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

Final Takeaway

Has CROWNHAITAI HoldingsLtd 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.

With that being said, if you're still considering CROWNHAITAI HoldingsLtd as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that CROWNHAITAI HoldingsLtd is showing 3 warning signs in our investment analysis, and 2 of those don't sit too well with us...

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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