Stock Analysis

Don't Race Out To Buy TLi Inc. (KOSDAQ:062860) Just Because It's Going Ex-Dividend

KOSDAQ:A062860
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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see TLi Inc. (KOSDAQ:062860) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 13th of April.

TLi's upcoming dividend is ₩100.00 a share, following on from the last 12 months, when the company distributed a total of ₩100.00 per share to shareholders. Calculating the last year's worth of payments shows that TLi has a trailing yield of 1.4% on the current share price of ₩7340. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for TLi

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. TLi 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. 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.

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

historic-dividend
KOSDAQ:A062860 Historic Dividend December 25th 2020

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. TLi 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. TLi's dividend payments per share have declined at 15% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

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

Final Takeaway

Has TLi got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. 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 TLi. Our analysis shows 3 warning signs for TLi that we strongly recommend you have a look at before investing in the company.

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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