We Wouldn't Be Too Quick To Buy Huvitz Co., Ltd. (KOSDAQ:065510) Before It Goes Ex-Dividend

Huvitz Co., Ltd. (KOSDAQ:065510) is about to trade ex-dividend in the next three days. 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 8th of April.

Huvitz's upcoming dividend is ₩150 a share, following on from the last 12 months, when the company distributed a total of ₩150 per share to shareholders. Last year's total dividend payments show that Huvitz has a trailing yield of 2.0% on the current share price of ₩7500. 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.

See our latest analysis for Huvitz

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Huvitz reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. 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. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.

Click here to see how much of its profit Huvitz 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 fall far enough, the company could be forced to cut its dividend. Huvitz 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Huvitz has delivered an average of 4.1% per year annual increase in its dividend, based on the past 10 years of dividend payments.

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

To Sum It Up

From a dividend perspective, should investors buy or avoid Huvitz? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

So if you're still interested in Huvitz despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Huvitz is showing 4 warning signs in our investment analysis, and 2 of those are a bit concerning...

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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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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