i Cubed Systems (TSE:4495) Is Paying Out A Larger Dividend Than Last Year

i Cubed Systems, Inc. (TSE:4495) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of September to ¥32.00. This takes the dividend yield to 2.2%, which shareholders will be pleased with.

See our latest analysis for i Cubed Systems

i Cubed Systems' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, i Cubed Systems' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 36.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

i Cubed Systems Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the dividend has gone from ¥10.00 total annually to ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 47% a year over that time. i Cubed Systems has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

i Cubed Systems May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.1% per annum over the last three years, which admittedly is a bit slow. If i Cubed Systems is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for i Cubed Systems that investors should know about before committing capital to this stock. Is i Cubed Systems not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.

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