AIA Group (HKG:1299) Has Announced That It Will Be Increasing Its Dividend To HK$1.08

The board of AIA Group Limited (HKG:1299) has announced that it will be increasing its dividend on the 10th of June to HK$1.08. Even though the dividend went up, the yield is still quite low at only 1.9%.

View our latest analysis for AIA Group

AIA Group Is Paying Out More Than It Is Earning

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, AIA Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 3.9% over the next year. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.

AIA Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.028 in 2012, and the most recent fiscal year payment was US$0.19. This means that it has been growing its distributions at 21% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see AIA Group has been growing its earnings per share at 12% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like AIA Group's Dividend

Overall, a dividend increase is always good, and we think that AIA Group is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 18 AIA Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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