System Research Co.,Ltd. (TSE:3771) Passed Our Checks, And It's About To Pay A JP¥60.00 Dividend

It looks like System Research Co.,Ltd. (TSE:3771) is about to go ex-dividend in the next three 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase System ResearchLtd's shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 4th of June.

The company's upcoming dividend is JP¥60.00 a share, following on from the last 12 months, when the company distributed a total of JP¥60.00 per share to shareholders. Based on the last year's worth of payments, System ResearchLtd has a trailing yield of 3.6% on the current stock price of JP¥1678.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. That's why it's good to see System ResearchLtd paying out a modest 32% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 62% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that System ResearchLtd'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.

View our latest analysis for System ResearchLtd

Click here to see how much of its profit System ResearchLtd 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. Fortunately for readers, System ResearchLtd's earnings per share have been growing at 18% a year for the past five years. System ResearchLtd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, System ResearchLtd has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is System ResearchLtd an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, System ResearchLtd paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in System ResearchLtd for the dividends alone, you should always be mindful of the risks involved. For example - System ResearchLtd has 2 warning signs we think you should be aware of.

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.