Why It Might Not Make Sense To Buy Kolon Mobility Group Corporation (KRX:450140) For Its Upcoming Dividend

Kolon Mobility Group Corporation (KRX:450140) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Kolon Mobility Group's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 24th of April.

The company's upcoming dividend is ₩40.00 a share, following on from the last 12 months, when the company distributed a total of ₩60.00 per share to shareholders. Looking at the last 12 months of distributions, Kolon Mobility Group has a trailing yield of approximately 2.2% on its current stock price of ₩2740.00. 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 Kolon Mobility Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Kolon Mobility Group

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. Kolon Mobility Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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. Kolon Mobility Group paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Kolon Mobility Group 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.

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

Get our latest analysis on Kolon Mobility Group's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Kolon Mobility Group? It's hard to get used to Kolon Mobility Group paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. Bottom line: Kolon Mobility Group has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Kolon Mobility Group. For example, Kolon Mobility Group has 4 warning signs (and 3 which are a bit concerning) we think you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.