Softcreate Holdings Corp. (TSE:3371) Passed Our Checks, And It's About To Pay A JP¥27.50 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Softcreate Holdings Corp. (TSE:3371) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be two business days 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 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. Accordingly, Softcreate Holdings investors that purchase the stock on or after the 28th of March will not receive the dividend, which will be paid on the 5th of June.

The company's upcoming dividend is JP¥27.50 a share, following on from the last 12 months, when the company distributed a total of JP¥55.00 per share to shareholders. Looking at the last 12 months of distributions, Softcreate Holdings has a trailing yield of approximately 2.7% on its current stock price of JP¥2028.00. 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 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. Softcreate Holdings is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out 20% of its free cash flow as dividends last year, which is conservatively low.

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.

Check out our latest analysis for Softcreate Holdings

Click here to see how much of its profit Softcreate Holdings 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Softcreate Holdings has grown its earnings rapidly, up 24% a year for the past five years. Softcreate Holdings earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Softcreate Holdings has delivered 20% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has Softcreate Holdings got what it takes to maintain its dividend payments? We love that Softcreate Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

Curious about whether Softcreate Holdings has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.