The board of Car Mate Mfg. Co., Ltd. (TSE:7297) has announced that it will pay a dividend of ¥15.00 per share on the 2nd of December. This means the dividend yield will be fairly typical at 3.2%.
See our latest analysis for Car Mate Mfg
Car Mate Mfg Is Paying Out More Than It Is Earning
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.
If the company can't turn things around, EPS could fall by 27.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 144%, which could put the dividend in jeopardy if the company's earnings don't improve.
Car Mate Mfg Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥20.00 in 2014, and the most recent fiscal year payment was ¥30.00. This means that it has been growing its distributions at 4.1% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Car Mate Mfg's EPS has fallen by approximately 27% per year during the past 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, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Car Mate Mfg is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Car Mate Mfg (of which 2 are significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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About TSE:7297
Excellent balance sheet average dividend payer.
