Dividend Investors: Don't Be Too Quick To Buy IDIS Holdings Co., Ltd. (KOSDAQ:054800) For Its Upcoming Dividend

IDIS Holdings Co., Ltd. (KOSDAQ:054800) stock is about to trade ex-dividend in 3 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 16th of April.

IDIS Holdings's next dividend payment will be ₩200 per share, and in the last 12 months, the company paid a total of ₩200 per share. Calculating the last year's worth of payments shows that IDIS Holdings has a trailing yield of 1.6% on the current share price of ₩12900. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for IDIS Holdings

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. IDIS Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. 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 IDIS Holdings 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 good news is it paid out just 24% of its free cash flow in the last year.

Click here to see how much of its profit IDIS Holdings 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. IDIS Holdings 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the IDIS Holdings dividends are largely the same as they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Get our latest analysis on IDIS Holdings's balance sheet health here.

Final Takeaway

Has IDIS Holdings got what it takes to maintain its dividend payments? It's hard to get used to IDIS Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of IDIS Holdings.

So if you're still interested in IDIS Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 2 warning signs for IDIS Holdings (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.

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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