Corona (TSE:5909) Has Announced A Dividend Of ¥14.00

Corona Corporation's (TSE:5909) investors are due to receive a payment of ¥14.00 per share on 4th of December. The dividend yield will be 2.9% based on this payment which is still above the industry average.

See our latest analysis for Corona

Corona's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Corona 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 could rise by 3.8% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which is in the range that makes us comfortable with the sustainability of the dividend.

Corona Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥26.00 in 2014 to the most recent total annual payment of ¥28.00. Dividend payments have been growing, but very slowly over the period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.8% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 3.8% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Corona's 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Corona that you should be aware of before investing. Is Corona not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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