Don't Buy SAMT Co., Ltd. (KOSDAQ:031330) For Its Next Dividend Without Doing These Checks

It looks like SAMT Co., Ltd. (KOSDAQ:031330) is about to go ex-dividend in the next three days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 17th of April.

SAMT's upcoming dividend is ₩140 a share, following on from the last 12 months, when the company distributed a total of ₩140 per share to shareholders. Looking at the last 12 months of distributions, SAMT has a trailing yield of approximately 5.5% on its current stock price of ₩2560. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether SAMT has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for SAMT

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. SAMT paid out a comfortable 40% of its profit last year. 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. SAMT paid out more free cash flow than it generated - 154%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

SAMT paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were SAMT to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that SAMT's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

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

Final Takeaway

Has SAMT got what it takes to maintain its dividend payments? It's disappointing to see earnings per share have fallen slightly, even though SAMT is paying out less than half its income as dividends. It's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. Bottom line: SAMT has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in SAMT and want to know more, you'll find it very useful to know what risks this stock faces. For example - SAMT has 1 warning sign we think you should be aware of.

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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