Computer Institute of Japan, Ltd. (TSE:4826) Stock Goes Ex-Dividend In Just Three Days

It looks like Computer Institute of Japan, Ltd. (TSE:4826) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. This means that investors who purchase Computer Institute of Japan's shares on or after the 29th of December will not receive the dividend, which will be paid on the 3rd of March.

The company's next dividend payment will be JP¥8.00 per share, on the back of last year when the company paid a total of JP¥16.00 to shareholders. Calculating the last year's worth of payments shows that Computer Institute of Japan has a trailing yield of 3.0% on the current share price of JP¥528.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Computer Institute of Japan is paying out an acceptable 52% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Computer Institute of Japan generated enough free cash flow to afford its dividend. Dividends consumed 59% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

Check out our latest analysis for Computer Institute of Japan

Click here to see how much of its profit Computer Institute of Japan paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Computer Institute of Japan's earnings per share have been growing at 10% a year for the past five years. Computer Institute of Japan is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Computer Institute of Japan has delivered 17% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Computer Institute of Japan got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Computer Institute of Japan is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Computer Institute of Japan's dividend merits.

In light of that, while Computer Institute of Japan has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Computer Institute of Japan that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.