Hokkaido Coca-Cola BottlingLtd (TSE:2573) Could Be A Buy For Its Upcoming Dividend

It looks like Hokkaido Coca-Cola Bottling Co.,Ltd. (TSE:2573) is about to go ex-dividend in the next two days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Hokkaido Coca-Cola BottlingLtd investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 5th of September.

The company's upcoming dividend is JP¥15.00 a share, following on from the last 12 months, when the company distributed a total of JP¥30.00 per share to shareholders. Based on the last year's worth of payments, Hokkaido Coca-Cola BottlingLtd has a trailing yield of 1.1% on the current stock price of JP¥2811.00. If you buy this business for its dividend, you should have an idea of whether Hokkaido Coca-Cola BottlingLtd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Hokkaido Coca-Cola BottlingLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hokkaido Coca-Cola BottlingLtd has a low and conservative payout ratio of just 25% of its income after tax. A useful secondary check can be to evaluate whether Hokkaido Coca-Cola BottlingLtd generated enough free cash flow to afford its dividend. It distributed 50% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Hokkaido Coca-Cola BottlingLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Hokkaido Coca-Cola BottlingLtd, with earnings per share up 4.8% on average over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hokkaido Coca-Cola BottlingLtd's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Is Hokkaido Coca-Cola BottlingLtd an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Hokkaido Coca-Cola BottlingLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Hokkaido Coca-Cola BottlingLtd is halfway there. There's a lot to like about Hokkaido Coca-Cola BottlingLtd, and we would prioritise taking a closer look at it.

While it's tempting to invest in Hokkaido Coca-Cola BottlingLtd for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Hokkaido Coca-Cola BottlingLtd that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com