Internet Initiative Japan (TSE:3774) Is Increasing Its Dividend To ¥17.50

Internet Initiative Japan Inc.'s (TSE:3774) periodic dividend will be increasing on the 9th of December to ¥17.50, with investors receiving 1.9% more than last year's ¥17.18. Even though the dividend went up, the yield is still quite low at only 1.3%.

View our latest analysis for Internet Initiative Japan

Internet Initiative Japan's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Internet Initiative Japan's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 12.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Internet Initiative Japan Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥5.50 in 2014, and the most recent fiscal year payment was ¥34.36. This means that it has been growing its distributions at 20% 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 Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Internet Initiative Japan has been growing its earnings per share at 38% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Internet Initiative Japan's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Internet Initiative 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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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.