Japan Medical Dynamic Marketing's (TSE:7600) Upcoming Dividend Will Be Larger Than Last Year's

Japan Medical Dynamic Marketing, INC. (TSE:7600) will increase its dividend from last year's comparable payment on the 26th of June to ¥14.00. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.

See our latest analysis for Japan Medical Dynamic Marketing

Japan Medical Dynamic Marketing's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Japan Medical Dynamic Marketing's dividend was only 34% of earnings, however it was paying out 207% of free 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. Assuming the dividend continues along recent trends, we believe the payout ratio could be 44%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Japan Medical Dynamic Marketing 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 ¥5.00 in 2014 to the most recent total annual payment of ¥14.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Japan Medical Dynamic Marketing has seen earnings per share falling at 8.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

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 Japan Medical Dynamic Marketing is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 4 warning signs for Japan Medical Dynamic Marketing (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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