Internet Initiative Japan's (TSE:3774) Shareholders Will Receive A Bigger Dividend Than Last Year

Internet Initiative Japan Inc.'s (TSE:3774) dividend will be increasing from last year's payment of the same period to ¥19.50 on 8th of December. Even though the dividend went up, the yield is still quite low at only 1.4%.

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

Even a low dividend yield can be attractive if it is sustained for years on end. However, based ont he last payment, Internet Initiative Japan was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Looking forward, earnings per share is forecast to rise by 13.5% 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.

See 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. The dividend has gone from an annual total of ¥5.50 in 2015 to the most recent total annual payment of ¥39.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year 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

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 37% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Internet Initiative Japan's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. 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. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 9 analysts we track are forecasting for Internet Initiative Japan for free with public analyst estimates for the company. 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.