Factors Income Investors Should Consider Before Adding JW Shinyak Corporation (KOSDAQ:067290) To Their Portfolio

Is JW Shinyak Corporation (KOSDAQ:067290) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

A slim 1.1% yield is hard to get excited about, but the long payment history is respectable. At the right price, or with strong growth opportunities, JW Shinyak could have potential. There are a few simple ways to reduce the risks of buying JW Shinyak for its dividend, and we'll go through these below.

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Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Although JW Shinyak pays a dividend, it was loss-making during the past year. When a company recently reported a loss, we should investigate if its cash flows covered the dividend.

With a cash payout ratio of 129%, JW Shinyak's dividend payments are poorly covered by cash flow.

Remember, you can always get a snapshot of JW Shinyak's latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. For the purpose of this article, we only scrutinise the last decade of JW Shinyak's dividend payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past 10-year period, the first annual payment was ₩28.8 in 2011, compared to ₩57.1 last year. Dividends per share have grown at approximately 7.1% per year over this time.

Businesses that can grow their dividends at a decent rate and maintain a stable payout can generate substantial wealth for shareholders over the long term.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. JW Shinyak's EPS have fallen by approximately 24% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective, as even conservative payout ratios can come under pressure if earnings fall far enough.

Conclusion

To summarise, shareholders should always check that JW Shinyak's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. JW Shinyak's dividend is not well covered by free cash flow, plus it paid a dividend while being unprofitable. Moreover, earnings have been shrinking. While the dividends have been fairly steady, we'd wonder for how much longer this will be sustainable if earnings continue to decline. In this analysis, JW Shinyak doesn't shape up too well as a dividend stock. We'd find it hard to look past the flaws, and would not be inclined to think of it as a reliable dividend-payer.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come accross 2 warning signs for JW Shinyak you should be aware of, and 1 of them is potentially serious.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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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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