Stock Analysis

It Might Not Be A Great Idea To Buy Haitai Confectionery&Foods Co.,ltd. (KRX:101530) For Its Next Dividend

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Readers hoping to buy Haitai Confectionery&Foods Co.,ltd. (KRX:101530) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 13th of April.

Haitai Confectionery&Foodsltd's next dividend payment will be ₩150 per share, on the back of last year when the company paid a total of ₩150 to shareholders. Last year's total dividend payments show that Haitai Confectionery&Foodsltd has a trailing yield of 1.8% on the current share price of ₩8410. 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! So we need to investigate whether Haitai Confectionery&Foodsltd can afford its dividend, and if the dividend could grow.

See our latest analysis for Haitai Confectionery&Foodsltd

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. Haitai Confectionery&Foodsltd lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. 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 Haitai Confectionery&Foodsltd 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. What's good is that dividends were well covered by free cash flow, with the company paying out 7.3% of its cash flow last year.

Click here to see how much of its profit Haitai Confectionery&Foodsltd paid out over the last 12 months.

KOSE:A101530 Historic Dividend December 25th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Haitai Confectionery&Foodsltd was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Given that Haitai Confectionery&Foodsltd 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 Haitai Confectionery&Foodsltd's balance sheet health here.

The Bottom Line

Is Haitai Confectionery&Foodsltd worth buying for its dividend? 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 Haitai Confectionery&Foodsltd as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 3 warning signs for Haitai Confectionery&Foodsltd (2 can't be ignored!) that deserve your attention before investing in the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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Valuation is complex, but we're helping make it simple.

Find out whether Haitai Confectionery&Foodsltd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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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