Dividend Investors: Don't Be Too Quick To Buy MK Electron Co., Ltd. (KOSDAQ:033160) For Its Upcoming Dividend

It looks like MK Electron Co., Ltd. (KOSDAQ:033160) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase MK Electron's shares before the 27th of December to receive the dividend, which will be paid on the 9th of April.

The company's next dividend payment will be ₩100.00 per share, and in the last 12 months, the company paid a total of ₩100.00 per share. Based on the last year's worth of payments, MK Electron stock has a trailing yield of around 1.5% on the current share price of ₩6530.00. If you buy this business for its dividend, you should have an idea of whether MK Electron's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for MK Electron

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. MK Electron reported a loss last year, so it's not great to see that it has continued paying a dividend. 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. Luckily it paid out just 9.8% of its free cash flow last year.

Click here to see how much of its profit MK Electron 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. MK Electron 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the MK Electron dividends are largely the same as they were six years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

Get our latest analysis on MK Electron's balance sheet health here.

Final Takeaway

Is MK Electron an attractive dividend stock, or better left on the shelf? It's hard to get used to MK Electron paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

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 MK Electron. Be aware that MK Electron is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.