Don't Race Out To Buy INITECH Co., Ltd. (KOSDAQ:053350) Just Because It's Going Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that INITECH Co., Ltd. (KOSDAQ:053350) is about to go ex-dividend in just three days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 20th of April.

INITECH's next dividend payment will be ₩20.00 per share. Last year, in total, the company distributed ₩20.00 to shareholders. Based on the last year's worth of payments, INITECH has a trailing yield of 0.4% on the current stock price of ₩4615. If you buy this business for its dividend, you should have an idea of whether INITECH's dividend is reliable and sustainable. So we need to investigate whether INITECH can afford its dividend, and if the dividend could grow.

Check out our latest analysis for INITECH

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. INITECH reported a loss last year, so it's not great to see that it has continued paying a dividend. 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 INITECH didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 2.7% of its cash flow last year.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. INITECH 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.

Unfortunately INITECH has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Remember, you can always get a snapshot of INITECH's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid INITECH? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that in mind though, if the poor dividend characteristics of INITECH don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 2 warning signs for INITECH (1 is a bit concerning!) that you ought to be aware of before buying the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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