Japan Medical Dynamic Marketing (TSE:7600) Will Pay A Larger Dividend Than Last Year At ¥14.00

Japan Medical Dynamic Marketing, INC. (TSE:7600) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of June to ¥14.00. The payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

View our latest analysis for Japan Medical Dynamic Marketing

Japan Medical Dynamic Marketing's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Japan Medical Dynamic Marketing was paying only paying out a fraction of earnings, but the payment was a massive 207% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, EPS could fall by 8.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 44%, which is definitely feasible to continue.

Japan Medical Dynamic Marketing Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥5.00, compared to the most recent full-year payment of ¥14.00. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Come By

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. It's not great to see that Japan Medical Dynamic Marketing's earnings per share has fallen at approximately 8.4% per year over the past five years. 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 Japan Medical Dynamic Marketing's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Japan Medical Dynamic Marketing's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Japan Medical Dynamic Marketing you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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