The Relationship between Water/Energy Reduction and Shareholders' Dividend Yield

Abstract

In a world of increasing energy and water scarcity, companies are devising new technical and operational strategies to reduce energy and water consumption – especially the ratio of water and energy usage to units of production. Savings derivable from such environmental resource conservation contribute to cost reduction, which invariably result in better financial performance. This paper analysed the relationship between water and energy reduction on dividend yield. Many studies on water and energy efficiency's effect on financial performance have paid little attention to dividend yield – hence this paper contributes to the academic science. The paper applied a positivist paradigm and hence a quantitative approach. Data on energy reduction, water reduction, and dividend yield were from the Coca-Cola financial and sustainability reports for different years. A simple regression analysis was applied to the data analysis. Research results indicate that at an alpha level of 0.05%, energy and water reduction are significantly related to dividend yield at a p-value of P<0.05. Thus, the increase in the dividend, which emerged from water and energy reduction, has a practical significance for Coca-Cola Company and other beverage industries. The paper provides practical and research recommendations based on which the beverage industry may contribute to environmental resource conservation by devising a strategy to reduce water and energy per unit of production. Furthermore, the paper recommends further study on this concept to apply dividend yield as a financial performance proxy and expand the study time series whilst accommodating other beverage industries.