Shin Nippon Biomedical Laboratories (TSE:2395) Has Announced A Dividend Of ¥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. This makes the dividend yield 3.6%, which will augment investor returns quite nicely.

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Shin Nippon Biomedical Laboratories' Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Shin Nippon Biomedical Laboratories' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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 17.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Shin Nippon Biomedical Laboratories

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

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. The dividend has gone from an annual total of ¥3.00 in 2019 to the most recent total annual payment of ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 60% a year over that time. Shin Nippon Biomedical Laboratories has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Shin Nippon Biomedical Laboratories has seen EPS rising for the last five years, at 14% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Shin Nippon Biomedical Laboratories is a great stock to add to your portfolio if income is your focus.

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 instance, we've picked out 3 warning signs for Shin Nippon Biomedical Laboratories that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.