Do These 3 Checks Before Buying JW Pharmaceutical Corporation (KRX:001060) For Its Upcoming Dividend

JW Pharmaceutical Corporation (KRX:001060) stock is about to trade ex-dividend in 4 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 24th of April.

JW Pharmaceutical's next dividend payment will be ₩316 per share. Last year, in total, the company distributed ₩325 to shareholders. Based on the last year's worth of payments, JW Pharmaceutical has a trailing yield of 1.0% on the current stock price of ₩34100. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether JW Pharmaceutical can afford its dividend, and if the dividend could grow.

View our latest analysis for JW Pharmaceutical

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. JW 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. 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 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. Luckily it paid out just 11% of its free cash flow last year.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. JW Pharmaceutical 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, JW Pharmaceutical has lifted its dividend by approximately 4.8% a year on average.

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

The Bottom Line

Is JW Pharmaceutical an attractive dividend stock, or better left on the shelf? 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." Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Although, if you're still interested in JW Pharmaceutical and want to know more, you'll find it very useful to know what risks this stock faces. We've identified 2 warning signs with JW Pharmaceutical (at least 1 which can't be ignored), and understanding these should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top 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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