Here's Why We're Wary Of Buying Moorim P&P's (KRX:009580) For Its Upcoming Dividend

It looks like Moorim P&P Co., Ltd. (KRX:009580) is about to go ex-dividend in the next four days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 14th of April.

Moorim P&P's next dividend payment will be ₩175 per share, on the back of last year when the company paid a total of ₩175 to shareholders. Looking at the last 12 months of distributions, Moorim P&P has a trailing yield of approximately 4.9% on its current stock price of ₩3545. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Moorim P&P

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. Moorim P&P 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 Moorim P&P 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. It paid out more than half (68%) of its free cash flow in the past year, which is within an average range for most companies.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Moorim P&P reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Moorim P&P has seen its dividend decline 16% per annum on average over the past two years, which is not great to see.

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

To Sum It Up

Has Moorim P&P got what it takes to maintain its dividend payments? 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." All things considered, we are not particularly enthused about Moorim P&P from a dividend perspective.

If you're not too concerned about Moorim P&P's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Moorim P&P has 2 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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