Intellex Co., Ltd. (TSE:8940) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Intellex Co., Ltd. (TSE:8940) is about to trade ex-dividend in the next 3 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Intellex's shares before the 28th of November to receive the dividend, which will be paid on the 10th of February.

The company's next dividend payment will be JP¥17.00 per share, on the back of last year when the company paid a total of JP¥20.00 to shareholders. Based on the last year's worth of payments, Intellex has a trailing yield of 2.7% on the current stock price of JP¥739.00. 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 investigate whether Intellex can afford its dividend, and if the dividend could grow.

View our latest analysis for Intellex

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. Intellex paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 2.5% of its cash flow last year.

It's positive to see that Intellex'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 Intellex paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Intellex's earnings per share have risen 11% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Intellex has seen its dividend decline 3.3% per annum on average over the past 10 years, which is not great to see. Intellex is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Intellex worth buying for its dividend? Intellex has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Intellex looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Intellex has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Intellex has 4 warning signs (and 1 which is concerning) 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.