Dividend Investors: Don't Be Too Quick To Buy SeAH Besteel Corporation (KRX:001430) For Its Upcoming Dividend

SeAH Besteel Corporation (KRX:001430) is about to trade ex-dividend in the next 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 17th of April.

SeAH Besteel's upcoming dividend is ₩300 a share, following on from the last 12 months, when the company distributed a total of ₩300 per share to shareholders. Based on the last year's worth of payments, SeAH Besteel has a trailing yield of 2.9% on the current stock price of ₩10500. If you buy this business for its dividend, you should have an idea of whether SeAH Besteel's dividend is reliable and sustainable. As a result, readers should always check whether SeAH Besteel has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for SeAH Besteel

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. SeAH Besteel 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. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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. It paid out 3.8% of its free cash flow as dividends last year, which is conservatively low.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. SeAH Besteel 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the SeAH Besteel dividends are largely the same as they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

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

Final Takeaway

Is SeAH Besteel an attractive dividend stock, or better left on the shelf? 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.

Although, if you're still interested in SeAH Besteel and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 2 warning signs for SeAH Besteel (1 doesn't sit too well with us!) 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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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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