Internet Initiative Japan Inc. (TSE:3774) Looks Interesting, And It’s About To Pay A Dividend

Internet Initiative Japan Inc. (TSE:3774) is about to trade ex-dividend in the next 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. Thus, you can purchase Internet Initiative Japan’s shares before the 28th of March in order to receive the dividend, which the company will pay on the 1st of July.

The company’s next dividend payment will be JP¥17.18 per share, and in the last 12 months, the company paid a total of JP¥34.36 per share. Calculating the last year’s worth of payments shows that Internet Initiative Japan has a trailing yield of 1.2% on the current share price of JP¥2872.00. If you buy this business for its dividend, you should have an idea of whether Internet Initiative Japan’s dividend is reliable and sustainable. As a result, readers should always check whether Internet Initiative Japan has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Internet Initiative Japan

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. Fortunately Internet Initiative Japan’s payout ratio is modest, at just 30% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s comforting to see Internet Initiative Japan’s earnings have been skyrocketing, up 30% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Internet Initiative Japan has lifted its dividend by approximately 20% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Internet Initiative Japan an attractive dividend stock, or better left on the shelf? We love that Internet Initiative Japan is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Internet Initiative Japan looks solid on this analysis overall, and we’d definitely consider investigating it more closely.

Wondering what the future holds for Internet Initiative Japan? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.