Car Mate Mfg (TSE:7297) Will 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 3.5% based on this payment which is still above the industry average.

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Car Mate Mfg's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 127% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 18%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS has fallen by an average of 31.3% in the past, so this could continue over the next year. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

Check out our latest analysis for Car Mate Mfg

Car Mate Mfg Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥20.00 in 2015 to the most recent total annual payment of ¥30.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Car Mate Mfg's EPS has fallen by approximately 31% 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.

Our Thoughts On Car Mate Mfg's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Car Mate Mfg (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.