Shin Nippon Biomedical Laboratories' (TSE:2395) Dividend Will Be ¥20.00

The board of Shin Nippon Biomedical Laboratories, Ltd. (TSE:2395) has announced that it will pay a dividend of ¥20.00 per share on the 2nd of December. The dividend yield will be 3.8% based on this payment which is still above the industry average.

See our latest analysis for Shin Nippon Biomedical Laboratories

Shin Nippon Biomedical Laboratories' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Shin Nippon Biomedical Laboratories' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 8.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Shin Nippon Biomedical Laboratories Is Still Building Its Track Record

It is great to see that Shin Nippon Biomedical Laboratories has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2019, the dividend has gone from ¥3.00 total annually to ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 76% a year over that time. 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Shin Nippon Biomedical Laboratories has grown earnings per share at 23% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Shin Nippon Biomedical Laboratories' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Shin Nippon Biomedical Laboratories' payments, as there could be some issues with sustaining them into the future. While Shin Nippon Biomedical Laboratories is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. Just as an example, we've come across 4 warning signs for Shin Nippon Biomedical Laboratories you should be aware of, and 2 of them are concerning. Is Shin Nippon Biomedical Laboratories not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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