We Wouldn't Be Too Quick To Buy Bubang Co., Ltd. (KOSDAQ:014470) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bubang Co., Ltd. (KOSDAQ:014470) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 14th of April.

Bubang's next dividend payment will be ₩20.00 per share, on the back of last year when the company paid a total of ₩20.00 to shareholders. Looking at the last 12 months of distributions, Bubang has a trailing yield of approximately 0.7% on its current stock price of ₩2710. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Bubang has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Bubang

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. Bubang'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. What's good is that dividends were well covered by free cash flow, with the company paying out 5.8% of its cash flow last year.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Bubang 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.

Given that Bubang has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Remember, you can always get a snapshot of Bubang'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 Bubang? 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." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Bubang.

With that being said, if you're still considering Bubang as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 1 warning sign for Bubang that you should be aware of before investing in their 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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