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

Shin Nippon Biomedical Laboratories, Ltd.'s (TSE:2395) investors are due to receive a payment of ¥20.00 per share on 1st of December. Based on this payment, the dividend yield on the company's stock will be 3.2%, which is an attractive boost to shareholder returns.

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Shin Nippon Biomedical Laboratories' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Shin Nippon Biomedical Laboratories was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 18.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Shin Nippon Biomedical Laboratories

Shin Nippon Biomedical Laboratories Doesn't Have A Long Payment History

Shin Nippon Biomedical Laboratories' 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. The annual payment during the last 6 years was ¥3.00 in 2019, and the most recent fiscal year payment was ¥50.00. This implies that the company grew its distributions at a yearly rate of about 60% over that duration. 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.

We Could See Shin Nippon Biomedical Laboratories' Dividend Growing

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 9.4% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Shin Nippon Biomedical Laboratories (of which 1 is significant!) you should know about. 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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