JAPAF - Japan Tobacco: 6% Yield Remains Safe Despite Being Cut Following An Uncommon Circumstance

• Japan Tobacco sustained its dividends throughout the turmoil of 2020 but ended up reducing them at the start of 2021 following an uncommon circumstance.
• They would have still been capable of funding their previous dividend payments with free cash flow during 2021 but oddly, they would not be covered by their accrual-based profit.
• This lead management to reset their dividend policy to now pay approximately 75% of their profits, which leaves their dividend yield at a high near 6%.
• Thankfully, their financial position remains very healthy and thus they can easily afford to continue returning cash to their shareholders.
• It remains uncommon to see a dividend reduced in this circumstance but since it does not foretell any future financial pain, I still believe that a bullish rating is warranted.

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