AEON Credit Service (Asia) (HKG:900) Will Pay A Dividend Of HK$0.25

AEON Credit Service (Asia) Company Limited's (HKG:900) investors are due to receive a payment of HK$0.25 per share on 4th of November. This makes the dividend yield about the same as the industry average at 6.7%.

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AEON Credit Service (Asia)'s Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, AEON Credit Service (Asia)'s dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 21.0% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for AEON Credit Service (Asia)

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was HK$0.36 in 2015, and the most recent fiscal year payment was HK$0.50. This implies that the company grew its distributions at a yearly rate of about 3.3% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

AEON Credit Service (Asia) Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that AEON Credit Service (Asia) has grown earnings per share at 6.9% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, AEON Credit Service (Asia) has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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