Don't Race Out To Buy YES24 Co.,Ltd (KOSDAQ:053280) Just Because It's Going Ex-Dividend

YES24 Co.,Ltd (KOSDAQ:053280) stock is about to trade ex-dividend in three days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 2nd of April.

YES24Ltd's next dividend payment will be ₩200 per share. Last year, in total, the company distributed ₩200 to shareholders. Looking at the last 12 months of distributions, YES24Ltd has a trailing yield of approximately 1.4% on its current stock price of ₩14600. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for YES24Ltd

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. YES24Ltd reported a loss last year, so it's not great to see that it has continued paying a dividend. 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. It paid out an unsustainably high 474% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how YES24Ltd intends to continue funding this dividend, or if it could be forced to cut the payment.

Click here to see how much of its profit YES24Ltd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. YES24Ltd 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. YES24Ltd has delivered 7.2% dividend growth per year on average over the past 10 years.

Remember, you can always get a snapshot of YES24Ltd's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is YES24Ltd worth buying for its dividend? It's hard to get used to YES24Ltd paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that being said, if you're still considering YES24Ltd as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 4 warning signs we've spotted with YES24Ltd (including 1 which is significant).

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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