Computer Institute of Japan's (TSE:4826) Dividend Will Be ¥7.00

The board of Computer Institute of Japan, Ltd. (TSE:4826) has announced that it will pay a dividend of ¥7.00 per share on the 4th of September. However, the dividend yield of 3.0% is still a decent boost to shareholder returns.

We've discovered 1 warning sign about Computer Institute of Japan. View them for free.

Computer Institute of Japan's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Computer Institute of Japan's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

If the company can't turn things around, EPS could fall by 0.7% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 90%, meaning that most of the company's earnings is being paid out to shareholders.

See our latest analysis for Computer Institute of Japan

Computer Institute of Japan Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥3.33, compared to the most recent full-year payment of ¥14.00. This means that it has been growing its distributions at 15% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Computer Institute of Japan hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Computer Institute of Japan's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Computer Institute of Japan that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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