Internetworking and Broadband Consulting Co.,Ltd. (TSE:3920) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Internetworking and Broadband Consulting Co.,Ltd. (TSE:3920) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a 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. This means that investors who purchase Internetworking and Broadband ConsultingLtd's shares on or after the 28th of March will not receive the dividend, which will be paid on the 23rd of June.

The company's next dividend payment will be JP¥6.00 per share, on the back of last year when the company paid a total of JP¥12.00 to shareholders. Calculating the last year's worth of payments shows that Internetworking and Broadband ConsultingLtd has a trailing yield of 1.7% on the current share price of JP¥712.00. If you buy this business for its dividend, you should have an idea of whether Internetworking and Broadband ConsultingLtd's dividend is reliable and sustainable. 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 usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Internetworking and Broadband ConsultingLtd is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 18% of its free cash flow in the last year.

It's positive to see that Internetworking and Broadband ConsultingLtd'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 Internetworking and Broadband ConsultingLtd

Click here to see how much of its profit Internetworking and Broadband ConsultingLtd 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. For this reason, we're glad to see Internetworking and Broadband ConsultingLtd's earnings per share have risen 16% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Given that Internetworking and Broadband ConsultingLtd has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Internetworking and Broadband ConsultingLtd worth buying for its dividend? We love that Internetworking and Broadband ConsultingLtd 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. Overall we think this is an attractive combination and worthy of further research.

So while Internetworking and Broadband ConsultingLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 3 warning signs for Internetworking and Broadband ConsultingLtd (1 is potentially serious!) that you ought to be aware of before buying the shares.

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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.