AEON Financial Service Co., Ltd. (TSE:8570) will pay a dividend of ¥25.00 on the 14th of November. Based on this payment, the dividend yield on the company’s stock will be 4.1%, which is an attractive boost to shareholder returns.
AEON Financial Service’s Payment Expected To Have Solid Earnings Coverage
We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable.
AEON Financial Service has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but AEON Financial Service’s payout ratio of 59% is a good sign as this means that earnings decently cover dividends.
Over the next year, EPS is forecast to expand by 16.6%. If the dividend continues along recent trends, we estimate the future payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for AEON Financial Service
Dividend Volatility
The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from ¥60.00 total annually to ¥53.00. This works out to be a decline of approximately 1.2% per year over that time. A company that decreases its dividend over time generally isn’t what we are looking for.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though AEON Financial Service’s EPS has declined at around 12% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It’s not all bad news though, as the earnings are predicted to rise over the next 12 months – we would just be a bit cautious until this becomes a long term trend.
Our Thoughts On AEON Financial Service’s Dividend
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about AEON Financial Service’s payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments AEON Financial Service has been making. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 1 warning sign for AEON Financial Service that investors should take into consideration. Is AEON Financial Service not quite the opportunity you…
Read More: AEON Financial Service (TSE:8570) Is Due To Pay A Dividend Of ¥25.00
