There's A Lot To Like About PRONEXUS' (TSE:7893) Upcoming JP¥26.00 Dividend

PRONEXUS Inc. (TSE:7893) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase PRONEXUS' shares before the 27th of September in order to receive the dividend, which the company will pay on the 5th of December.

The company's upcoming dividend is JP¥26.00 a share, following on from the last 12 months, when the company distributed a total of JP¥36.00 per share to shareholders. Looking at the last 12 months of distributions, PRONEXUS has a trailing yield of approximately 2.9% on its current stock price of JP¥1256.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether PRONEXUS can afford its dividend, and if the dividend could grow.

View our latest analysis for PRONEXUS

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. That's why it's good to see PRONEXUS paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether PRONEXUS generated enough free cash flow to afford its dividend. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that PRONEXUS'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.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see PRONEXUS earnings per share are up 9.0% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PRONEXUS has delivered 7.2% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid PRONEXUS? Earnings per share have been growing moderately, and PRONEXUS is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and PRONEXUS is halfway there. There's a lot to like about PRONEXUS, and we would prioritise taking a closer look at it.

So while PRONEXUS looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, PRONEXUS has 2 warning signs (and 1 which is concerning) we think you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.