Shin Nippon Biomedical Laboratories (TSE:2395) Is Due To Pay 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 means the annual payment is 3.6% of the current stock price, which is above the average for the industry.

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Shin Nippon Biomedical Laboratories' Projected Earnings Seem Likely To Cover Future Distributions

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.

Looking forward, earnings per share is forecast to rise by 17.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Shin Nippon Biomedical Laboratories

Shin Nippon Biomedical Laboratories Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of ¥3.00 in 2019 to the most recent total annual payment of ¥50.00. This means that it has been growing its distributions at 60% 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 14% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

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 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Shin Nippon Biomedical Laboratories that you should be aware of before investing. 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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