AIA Group (HKG:1299) Has Announced That It Will Be Increasing Its Dividend To $1.31

The board of AIA Group Limited (HKG:1299) has announced that it will be paying its dividend of $1.31 on the 12th of June, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.7%, which is below the industry average.

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AIA Group's Future Dividends May Potentially Be At Risk

Even a low dividend yield can be attractive if it is sustained for years on end. But before making this announcement, AIA Group's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to expand by 33.3%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Check out our latest analysis for AIA Group

AIA Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.0639 in 2015 to the most recent total annual payment of $0.224. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

AIA Group Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. AIA Group has impressed us by growing EPS at 5.4% per 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.

Our Thoughts On AIA Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While AIA Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 15 analysts we track are forecasting for AIA Group for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.