Don't Race Out To Buy Wiscom Co.,Ltd. (KRX:024070) Just Because It's Going Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wiscom Co.,Ltd. (KRX:024070) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 1st of April.

WiscomLtd's upcoming dividend is ₩50.00 a share, following on from the last 12 months, when the company distributed a total of ₩50.00 per share to shareholders. Based on the last year's worth of payments, WiscomLtd stock has a trailing yield of around 2.0% on the current share price of ₩2540. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether WiscomLtd can afford its dividend, and if the dividend could grow.

Check out our latest analysis for WiscomLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. WiscomLtd reported a loss last year, so it's not great to see that it has continued paying a dividend. 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.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. WiscomLtd 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. WiscomLtd has seen its dividend decline 16% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

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

The Bottom Line

From a dividend perspective, should investors buy or avoid WiscomLtd? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by 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 WiscomLtd despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 3 warning signs for WiscomLtd that we strongly recommend you have a look at before investing in the company.

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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