Computer Engineering & Consulting (TSE:9692) Could Be A Buy For Its Upcoming Dividend

Computer Engineering & Consulting Ltd. (TSE:9692) is about to trade ex-dividend in the next 4 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Computer Engineering & Consulting's shares before the 30th of July in order to be eligible for the dividend, which will be paid on the 30th of September.

The company's next dividend payment will be JP¥30.00 per share, on the back of last year when the company paid a total of JP¥65.00 to shareholders. Based on the last year's worth of payments, Computer Engineering & Consulting stock has a trailing yield of around 2.9% on the current share price of JP¥2246.00. If you buy this business for its dividend, you should have an idea of whether Computer Engineering & Consulting's dividend is reliable and sustainable. As a result, readers should always check whether Computer Engineering & Consulting has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Computer Engineering & Consulting's payout ratio is modest, at just 45% of profit. 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. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

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.

See our latest analysis for Computer Engineering & Consulting

Click here to see how much of its profit Computer Engineering & Consulting paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Computer Engineering & Consulting earnings per share are up 4.2% per annum over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Computer Engineering & Consulting has lifted its dividend by approximately 21% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Computer Engineering & Consulting? Earnings per share have been growing moderately, and Computer Engineering & Consulting is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Computer Engineering & Consulting is being conservative with its dividend payouts and could still perform reasonably over the long run. Computer Engineering & Consulting looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Keen to explore more data on Computer Engineering & Consulting's financial performance? Check out our visualisation 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.