Dividend Investors: Don't Be Too Quick To Buy Singsong Holdings Co., Ltd. (KRX:006880) For Its Upcoming Dividend

Singsong Holdings Co., Ltd. (KRX:006880) stock is about to trade ex-dividend in 4 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 24th of April.

Singsong Holdings's upcoming dividend is ₩80.00 a share, following on from the last 12 months, when the company distributed a total of ₩80.00 per share to shareholders. Based on the last year's worth of payments, Singsong Holdings has a trailing yield of 2.0% on the current stock price of ₩4030. 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 Singsong Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Singsong Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Singsong Holdings 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 Singsong Holdings 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. Singsong Holdings paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see how much of its profit Singsong Holdings 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Singsong Holdings 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 Singsong Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Get our latest analysis on Singsong Holdings's balance sheet health here.

To Sum It Up

Should investors buy Singsong Holdings for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

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 Singsong Holdings. To help with this, we've discovered 3 warning signs for Singsong Holdings (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

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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