Shin Nippon Biomedical Laboratories (TSE:2395) Is Due To Pay A Dividend Of ¥30.00

Shin Nippon Biomedical Laboratories, Ltd. (TSE:2395) will pay a dividend of ¥30.00 on the 28th of June. Based on this payment, the dividend yield on the company's stock will be 3.2%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Shin Nippon Biomedical Laboratories

Shin Nippon Biomedical Laboratories' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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 74.5%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

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. The annual payment during the last 5 years was ¥3.00 in 2019, and the most recent fiscal year payment was ¥50.00. This means that it has been growing its distributions at 76% per annum 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 impressed us by growing EPS at 28% 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Shin Nippon Biomedical Laboratories you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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