Cochlear Limited (ASX: COH) may be amongst the S&P/ASX 200 Index's (ASX: XJO) most prominent healthcare shares, with its long history and famous hearing aid products. The company has been a steady long-term grower too, putting on almost 70% over the past 5 years. But it's fair to say that Cochlear shares are not well-known for their dividends.
At current pricing, Cochlear isn't going to set any income investors' hearts a-flutter with its trailing dividend yield of 0.93%. That yield doesn't come with any franking credits either.
In saying that, Cochlear does have quite a strong dividend growth record, or at least it did until recently. Between 2014 and 2019, Cochlear grew its dividend payouts from $1.27 in dividends per share in 2014 to $3.30 in dividends per share in 2019, increasing them every year in between. That's a compounded annual growth rate of more than 21% per annum over that span. All of those dividends came fully franked too.
Is Cochlear an ASX dividend growth share?
But recent times have been hard for Cochlear in the dividends department. The company skipped paying a dividend entirely in 2020. And 2021 saw Cochlear pay out $2.55 in dividends per share, a big drop from 2019's $3.30 per share. However, Cochlear did announce last month that its upcoming interim dividend for 2022 would come in at $1.55 per share, which equals 2019's interim dividend. So perhaps the good times are back for Cochlear's dividends…
One expert investor who thinks so is Michelle Lopez, head of Australian Equities at fund manager Abrdn. Here's some of what Lopez told a recent Livewire Buy Hold Sell podcast about Cochlear and its dividend:
It's not often I talk to Cochlear as a dividend stock. It isn't a high yielding stock, but what it is, is it's a growth yield and a growth dividend. This is a company that is spinning off a lot of cash. They're unwinding their CapEx programme. They're at the tail end of that so the free cash flow that they're spinning off is very high. They've got 500 million of net cash on their balance sheet.
So I think there's further growth in the dividend, but importantly, operationally, they're just executing well. They're super consistent in what they do. They've got a really clear strategy and invest for the future for growth. So that runway of growth, whether it's earnings or whether it's dividends, is very clear. So it's a buy.
Well that's how one investing expert is viewing Cochlear right now. If what Lopez predicts turns out to be accurate, perhaps Chochlear won't have a 0.93% dividend yield for long. But we shall have to wait and see.
At the current Cochlear share price, this ASX 200 healthcare share has a market capitalisation of $14.62 billion.
