AIA Group (HKG:1299) Will Pay A Larger Dividend Than Last Year At $1.19

The board of AIA Group Limited (HKG:1299) has announced that it will be paying its dividend of $1.19 on the 14th of June, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 3.4% is only a modest boost to shareholder returns.

Check out our latest analysis for AIA Group

AIA Group Is Paying Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by AIA Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Earnings per share is forecast to rise by 100.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

AIA Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.0548 total annually to $0.206. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See AIA Group's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. AIA Group has seen EPS rising for the last five years, at 6.7% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like AIA Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. 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. Is AIA Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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