Software Service, Inc. (TSE:3733) Passed Our Checks, And It's About To Pay A JP¥170.00 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Software Service, Inc. (TSE:3733) is about to trade ex-dividend in the next 4 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Software Service's shares before the 29th of October in order to receive the dividend, which the company will pay on the 26th of January.
The company's next dividend payment will be JP¥170.00 per share. Last year, in total, the company distributed JP¥170 to shareholders. Looking at the last 12 months of distributions, Software Service has a trailing yield of approximately 1.5% on its current stock price of JP¥11430.00. If you buy this business for its dividend, you should have an idea of whether Software Service's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Software Service has a low and conservative payout ratio of just 14% of its income after tax. 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. Luckily it paid out just 20% of its free cash flow last year.
It's positive to see that Software Service'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.
Check out our latest analysis for Software Service
Click here to see how much of its profit Software Service paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Software Service has grown its earnings rapidly, up 24% a year for the past five years. Software Service looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Software Service has delivered 10% dividend growth per year on average over the past six years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is Software Service an attractive dividend stock, or better left on the shelf? We love that Software Service is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Software Service looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Want to learn more about Software Service? Here's a visualisation of its historical rate of revenue and earnings growth.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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