Income Investors Should Know That Interspace Co.,Ltd. (TSE:2122) Goes Ex-Dividend Soon

Interspace Co.,Ltd. (TSE:2122) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, InterspaceLtd investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 25th of December.

The company's next dividend payment will be JP¥30.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Looking at the last 12 months of distributions, InterspaceLtd has a trailing yield of approximately 3.1% on its current stock price of JP¥959.00. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for InterspaceLtd

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. InterspaceLtd paid out a comfortable 41% of its profit last year. 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. Over the last year it paid out 62% of its free cash flow as dividends, within the usual range 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 how much of its profit InterspaceLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that InterspaceLtd's earnings are down 4.1% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, InterspaceLtd has lifted its dividend by approximately 20% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid InterspaceLtd? Earnings per share have fallen significantly, although at least InterspaceLtd paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall, it's hard to get excited about InterspaceLtd from a dividend perspective.

However if you're still interested in InterspaceLtd as a potential investment, you should definitely consider some of the risks involved with InterspaceLtd. In terms of investment risks, we've identified 1 warning sign with InterspaceLtd and understanding them should be part of your investment process.

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.