Dividend Investors: Don't Be Too Quick To Buy Ahn-Gook Pharmaceutical Co., Ltd. (KOSDAQ:001540) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ahn-Gook Pharmaceutical Co., Ltd. (KOSDAQ:001540) is about to go ex-dividend in just four days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 13th of April.

Ahn-Gook Pharmaceutical's next dividend payment will be ₩220 per share, and in the last 12 months, the company paid a total of ₩220 per share. Looking at the last 12 months of distributions, Ahn-Gook Pharmaceutical has a trailing yield of approximately 1.7% on its current stock price of ₩13250. If you buy this business for its dividend, you should have an idea of whether Ahn-Gook Pharmaceutical's dividend is reliable and sustainable. So we need to investigate whether Ahn-Gook Pharmaceutical can afford its dividend, and if the dividend could grow.

View our latest analysis for Ahn-Gook Pharmaceutical

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. Ahn-Gook Pharmaceutical's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. 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. Fortunately, it paid out only 41% of its free cash flow in the past year.

Click here to see how much of its profit Ahn-Gook Pharmaceutical 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. Ahn-Gook Pharmaceutical 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. Ahn-Gook Pharmaceutical has delivered an average of 8.7% per year annual increase in its dividend, based on the past 10 years of dividend payments.

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

To Sum It Up

From a dividend perspective, should investors buy or avoid Ahn-Gook Pharmaceutical? 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. Bottom line: Ahn-Gook Pharmaceutical has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that in mind though, if the poor dividend characteristics of Ahn-Gook Pharmaceutical don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Ahn-Gook Pharmaceutical is showing 3 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

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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