Don't Buy Korea New Network Co., Ltd. (KOSDAQ:058400) For Its Next Dividend Without Doing These Checks

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Korea New Network Co., Ltd. (KOSDAQ:058400) is about to trade ex-dividend in the next three 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 27th of March.

Korea New Network's upcoming dividend is ₩20.00 a share, following on from the last 12 months, when the company distributed a total of ₩20.00 per share to shareholders. Looking at the last 12 months of distributions, Korea New Network has a trailing yield of approximately 0.9% on its current stock price of ₩2200. If you buy this business for its dividend, you should have an idea of whether Korea New Network's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Korea New Network

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Korea New Network is paying out an acceptable 52% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Korea New Network generated enough free cash flow to afford its dividend. Fortunately, it paid out only 43% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Korea New Network's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Korea New Network's dividend payments per share have declined at 2.2% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

Is Korea New Network an attractive dividend stock, or better left on the shelf? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. Overall, it's hard to get excited about Korea New Network from a dividend perspective.

If you're not too concerned about Korea New Network's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 3 warning signs for Korea New Network (1 can't be ignored!) that you ought to be aware of before buying 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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