UniTest Incorporation (KOSDAQ:086390) Pays A ₩250 Dividend In Just Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see UniTest Incorporation (KOSDAQ:086390) is about to trade ex-dividend in the next three 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 7th of April.

UniTest Incorporation's next dividend payment will be ₩250 per share. Last year, in total, the company distributed ₩250 to shareholders. Based on the last year's worth of payments, UniTest Incorporation stock has a trailing yield of around 1.0% on the current share price of ₩24900. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for UniTest Incorporation

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. UniTest Incorporation lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. 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. Luckily it paid out just 19% of its free cash flow last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. UniTest Incorporation was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

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

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

To Sum It Up

Is UniTest Incorporation an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall, it's hard to get excited about UniTest Incorporation from a dividend perspective.

If you're not too concerned about UniTest Incorporation's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 1 warning sign for UniTest Incorporation that you should be aware of before investing in their shares.

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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