Don't Buy WooriNet, Inc. (KOSDAQ:115440) For Its Next Dividend Without Doing These Checks

Readers hoping to buy WooriNet, Inc. (KOSDAQ:115440) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 10th of April.

WooriNet's upcoming dividend is ₩50.00 a share, following on from the last 12 months, when the company distributed a total of ₩50.00 per share to shareholders. Last year's total dividend payments show that WooriNet has a trailing yield of 0.5% on the current share price of ₩9370. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for WooriNet

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. WooriNet'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. 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 cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. WooriNet was unprofitable last year, and sadly its loss per share worsened by 539% on the previous year.

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

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

To Sum It Up

From a dividend perspective, should investors buy or avoid WooriNet? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: WooriNet has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in WooriNet despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Case in point: We've spotted 2 warning signs for WooriNet you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top 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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