Car Mate Mfg (TSE:7297) Is Due To Pay A Dividend Of ¥15.00

Car Mate Mfg. Co., Ltd.'s (TSE:7297) investors are due to receive a payment of ¥15.00 per share on 2nd of December. The dividend yield will be 3.3% based on this payment which is still above the industry average.

View our latest analysis for Car Mate Mfg

Car Mate Mfg Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Car Mate Mfg was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Looking forward, EPS could fall by 26.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 118%, which could put the dividend in jeopardy if the company's earnings don't improve.

Car Mate Mfg Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥30.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 26% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Car Mate Mfg's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 3 warning signs for Car Mate Mfg (of which 1 is a bit concerning!) you should know about. Is Car Mate Mfg not quite the opportunity you were looking for? Why not check out 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.