It Might Not Be A Great Idea To Buy PS Tec. Co., Ltd. (KOSDAQ:002230) For Its Next Dividend

PS Tec. Co., Ltd. (KOSDAQ:002230) stock is about to trade ex-dividend in 4 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 10th of April.

PS Tec's upcoming dividend is ₩150 a share, following on from the last 12 months, when the company distributed a total of ₩150 per share to shareholders. Looking at the last 12 months of distributions, PS Tec has a trailing yield of approximately 3.1% on its current stock price of ₩4780. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for PS Tec

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. PS Tec's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If PS Tec 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. The company paid out 95% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. PS Tec 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 PS Tec has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

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

The Bottom Line

Is PS Tec worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering PS Tec as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 3 warning signs for PS Tec that we strongly recommend you have a look at before investing in the company.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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