I.A Group Corporation (TSE:7509) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

I.A Group Corporation (TSE:7509) stock is about to trade ex-dividend in 4 days. The ex-dividend date is commonly two business days 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 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. Therefore, if you purchase I.A Group's shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 27th of June.

The company's next dividend payment will be JP¥60.00 per share, and in the last 12 months, the company paid a total of JP¥120 per share. Calculating the last year's worth of payments shows that I.A Group has a trailing yield of 3.6% on the current share price of JP¥3320.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. I.A Group has a low and conservative payout ratio of just 14% of its income after tax. A useful secondary check can be to evaluate whether I.A Group generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.

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.

See our latest analysis for I.A Group

Click here to see how much of its profit I.A Group 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see I.A Group earnings per share are up 9.9% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. I.A Group's dividend payments are effectively flat on where they were 10 years ago.

The Bottom Line

From a dividend perspective, should investors buy or avoid I.A Group? Earnings per share have been growing moderately, and I.A Group 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. It might be nice to see earnings growing faster, but I.A Group is being conservative with its dividend payouts and could still perform reasonably over the long run. I.A Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks I.A Group is facing. For example, we've found 1 warning sign for I.A Group that we recommend you consider before investing in the business.

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.