Should Income Investors Look At C.E.Management Integrated Laboratory Co.Ltd (TSE:6171) Before Its Ex-Dividend?

C.E.Management Integrated Laboratory Co.Ltd (TSE:6171) stock is about to trade ex-dividend in 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase C.E.Management Integrated LaboratoryLtd's shares before the 29th of December to receive the dividend, which will be paid on the 24th of March.

The company's next dividend payment will be JP¥6.00 per share. Last year, in total, the company distributed JP¥12.00 to shareholders. Last year's total dividend payments show that C.E.Management Integrated LaboratoryLtd has a trailing yield of 2.9% on the current share price of JP¥417.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see C.E.Management Integrated LaboratoryLtd paying out a modest 46% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 65% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that C.E.Management Integrated LaboratoryLtd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for C.E.Management Integrated LaboratoryLtd

Click here to see how much of its profit C.E.Management Integrated LaboratoryLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see C.E.Management Integrated LaboratoryLtd earnings per share are up 4.2% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. C.E.Management Integrated LaboratoryLtd has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy C.E.Management Integrated LaboratoryLtd for the upcoming dividend? Earnings per share growth has been modest, and it's interesting that C.E.Management Integrated LaboratoryLtd is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while C.E.Management Integrated LaboratoryLtd has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for C.E.Management Integrated LaboratoryLtd you should be aware of.

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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.