Dividend Investors: Don't Be Too Quick To Buy Kiswire Ltd. (KRX:002240) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kiswire Ltd. (KRX:002240) is about to trade ex-dividend in the next 3 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 20th of April.

Kiswire's upcoming dividend is ₩350 a share, following on from the last 12 months, when the company distributed a total of ₩350 per share to shareholders. Last year's total dividend payments show that Kiswire has a trailing yield of 2.1% on the current share price of ₩16450. If you buy this business for its dividend, you should have an idea of whether Kiswire's dividend is reliable and sustainable. As a result, readers should always check whether Kiswire has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Kiswire

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. Kiswire reported a loss last year, so it's not great to see that it has continued paying a dividend. 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 Kiswire 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 6.3% of its cash flow last year.

Click here to see how much of its profit Kiswire paid out over the last 12 months.

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. Kiswire 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kiswire has delivered 4.4% dividend growth per year on average over the past 10 years.

Remember, you can always get a snapshot of Kiswire's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Kiswire worth buying for its 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." Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

So if you're still interested in Kiswire despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 2 warning signs for Kiswire (1 is significant!) 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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