Corona (TSE:5909) Is Due To Pay A Dividend Of ¥14.00

The board of Corona Corporation (TSE:5909) has announced that it will pay a dividend of ¥14.00 per share on the 4th of December. This means the annual payment is 3.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Corona

Corona's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Corona's earnings easily covered the dividend, but free cash flows were negative. 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 on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

Corona Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥26.00 in 2014, and the most recent fiscal year payment was ¥28.00. Its dividends have grown at less than 1% per annum over this time frame. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, Corona has only grown its earnings per share at 3.8% per annum over the past five years. 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

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Corona is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 1 warning sign for Corona that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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