Is It Worth Considering IFIS Japan Ltd. (TSE:7833) For Its Upcoming Dividend?

IFIS Japan Ltd. (TSE:7833) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase IFIS Japan's shares before the 27th of June in order to be eligible for the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥10.00 per share, and in the last 12 months, the company paid a total of JP¥21.50 per share. Looking at the last 12 months of distributions, IFIS Japan has a trailing yield of approximately 3.7% on its current stock price of JP¥585.00. 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.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see IFIS Japan paying out a modest 41% of its earnings. A useful secondary check can be to evaluate whether IFIS Japan generated enough free cash flow to afford its dividend. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that IFIS Japan's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for IFIS Japan

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that IFIS Japan's earnings are down 4.4% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. IFIS Japan has delivered 16% dividend growth per year on average over the past 10 years.

Final Takeaway

Should investors buy IFIS Japan for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of IFIS Japan's dividend merits.

On that note, you'll want to research what risks IFIS Japan is facing. For example, IFIS Japan has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.