Coca-Cola Bottlers Japan Holdings (TSE:2579) Has Announced That It Will Be Increasing Its Dividend To ¥32.00
Coca-Cola Bottlers Japan Holdings Inc. (TSE:2579) will increase its dividend from last year's comparable payment on the 30th of March to ¥32.00. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.
Coca-Cola Bottlers Japan Holdings' Distributions May Be Difficult To Sustain
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. While Coca-Cola Bottlers Japan Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Analysts are expecting EPS to grow by 85.5% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.
Check out our latest analysis for Coca-Cola Bottlers Japan Holdings
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥41.00 in 2015, and the most recent fiscal year payment was ¥64.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Dividend Growth Potential Is Shaky
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Coca-Cola Bottlers Japan Holdings' EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Coca-Cola Bottlers Japan Holdings' Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Coca-Cola Bottlers Japan Holdings' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Coca-Cola Bottlers Japan Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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