Shin Nippon Biomedical Laboratories (TSE:2395) Will Pay A Dividend Of ¥30.00

Shin Nippon Biomedical Laboratories, Ltd.'s (TSE:2395) investors are due to receive a payment of ¥30.00 per share on 25th of June. Based on this payment, the dividend yield on the company's stock will be 3.0%, which is an attractive boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Shin Nippon Biomedical Laboratories' stock price has increased by 38% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Shin Nippon Biomedical Laboratories

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

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Shin Nippon Biomedical Laboratories was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 19.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

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. Since 2019, the annual payment back then was ¥3.00, compared to the most recent full-year payment of ¥50.00. This means that it has been growing its distributions at 60% per annum over that time. 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.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Shin Nippon Biomedical Laboratories has impressed us by growing EPS at 15% 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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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 a bit unpleasant. 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.