C.E.Management Integrated LaboratoryLtd (TSE:6171) Will Pay A Dividend Of ¥6.00

C.E.Management Integrated Laboratory Co.Ltd (TSE:6171) has announced that it will pay a dividend of ¥6.00 per share on the 25th of March. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

View our latest analysis for C.E.Management Integrated LaboratoryLtd

C.E.Management Integrated LaboratoryLtd Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, C.E.Management Integrated LaboratoryLtd's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the company can't turn things around, EPS could fall by 9.6% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 112%, which is definitely a bit high to be sustainable going forward.

C.E.Management Integrated LaboratoryLtd Doesn't Have A Long Payment History

C.E.Management Integrated LaboratoryLtd's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the dividend has gone from ¥4.50 total annually to ¥12.00. This means that it has been growing its distributions at 12% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, C.E.Management Integrated LaboratoryLtd's earnings per share has shrunk at approximately 9.6% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On C.E.Management Integrated LaboratoryLtd's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 5 warning signs for C.E.Management Integrated LaboratoryLtd (1 is significant!) that you should be aware of before investing. Is C.E.Management Integrated LaboratoryLtd 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.