Internet Initiative Japan's (TSE:3774) Dividend Will Be Increased To ¥19.50

Internet Initiative Japan Inc. (TSE:3774) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of December to ¥19.50. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

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Internet Initiative Japan's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. But before making this announcement, Internet Initiative Japan's earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS is forecast to expand by 13.3%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Internet Initiative Japan

Internet Initiative Japan Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥5.50 total annually to ¥39.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Internet Initiative Japan has grown earnings per share at 38% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Internet Initiative Japan analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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