Here's Why We're Wary Of Buying Shinjin SmLtd's (KOSDAQ:138070) For Its Upcoming Dividend

Shinjin Sm Co.,Ltd. (KOSDAQ:138070) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 10th of April.

Shinjin SmLtd's next dividend payment will be ₩70.00 per share, on the back of last year when the company paid a total of ₩70.00 to shareholders. Based on the last year's worth of payments, Shinjin SmLtd stock has a trailing yield of around 1.5% on the current share price of ₩4640. If you buy this business for its dividend, you should have an idea of whether Shinjin SmLtd's dividend is reliable and sustainable. As a result, readers should always check whether Shinjin SmLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Shinjin SmLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shinjin SmLtd's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Shinjin SmLtd 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. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.

Click here to see how much of its profit Shinjin SmLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Shinjin SmLtd 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.

Unfortunately Shinjin SmLtd has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

We update our analysis on Shinjin SmLtd every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Should investors buy Shinjin SmLtd for the upcoming dividend? 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 an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that in mind though, if the poor dividend characteristics of Shinjin SmLtd don't faze you, it's worth being mindful of the risks involved with this business. We've identified 4 warning signs with Shinjin SmLtd (at least 2 which shouldn't be ignored), and understanding them should be part of your investment process.

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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