i Cubed Systems, Inc. (TSE:4495) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

i Cubed Systems, Inc. (TSE:4495) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, i Cubed Systems investors that purchase the stock on or after the 29th of December will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥18.00 per share, on the back of last year when the company paid a total of JP¥34.00 to shareholders. Based on the last year's worth of payments, i Cubed Systems has a trailing yield of 1.2% on the current stock price of JP¥2920.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately i Cubed Systems's payout ratio is modest, at just 27% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.

It's positive to see that i Cubed Systems's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for i Cubed Systems

Click here to see how much of its profit i Cubed Systems 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at i Cubed Systems, with earnings per share up 7.6% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. i Cubed Systems has delivered 36% dividend growth per year on average over the past four years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has i Cubed Systems got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and i Cubed Systems 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 i Cubed Systems is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in i Cubed Systems for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for i Cubed Systems 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.