Is It Worth Considering WOT. Co., Ltd (KOSDAQ:396470) For Its Upcoming Dividend?

Readers hoping to buy WOT. Co., Ltd (KOSDAQ:396470) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. This means that investors who purchase WOT's shares on or after the 27th of December will not receive the dividend, which will be paid on the 11th of April.

The company's next dividend payment will be ₩50.00 per share, on the back of last year when the company paid a total of ₩50.00 to shareholders. Last year's total dividend payments show that WOT has a trailing yield of 0.7% on the current share price of ₩7310.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for WOT

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. WOT paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit WOT 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. With that in mind, we're discomforted by WOT's 24% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

WOT also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

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

Final Takeaway

From a dividend perspective, should investors buy or avoid WOT? WOT has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while WOT has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for WOT (1 can't be ignored!) that deserve your attention before investing in the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.