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 3.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for C.E.Management Integrated LaboratoryLtd

C.E.Management Integrated LaboratoryLtd's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, C.E.Management Integrated LaboratoryLtd's dividend made up quite a large proportion of earnings but only 25% of free cash flows. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 4.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 82%, which is definitely on the higher side.

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

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was ¥4.50 in 2015, and the most recent fiscal year payment was ¥12.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. C.E.Management Integrated LaboratoryLtd has seen earnings per share falling at 4.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

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 payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for C.E.Management Integrated LaboratoryLtd you should be aware of, and 1 of them makes us a bit uncomfortable. 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.