AEON Stores (Hong Kong) (HKG:984) Is Paying Out A Dividend Of HK$0.03

The board of AEON Stores (Hong Kong) Co., Limited (HKG:984) has announced that it will pay a dividend on the 28th of October, with investors receiving HK$0.03 per share. The dividend yield will be 3.9% based on this payment which is still above the industry average.

Check out our latest analysis for AEON Stores (Hong Kong)

AEON Stores (Hong Kong)'s Distributions May Be Difficult To Sustain

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. AEON Stores (Hong Kong) is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS might fall by 47.0% based on recent performance. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.614 in 2012 to the most recent total annual payment of HK$0.05. The dividend has fallen 92% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. AEON Stores (Hong Kong)'s earnings per share has shrunk at 47% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

AEON Stores (Hong Kong)'s Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. Just as an example, we've come across 3 warning signs for AEON Stores (Hong Kong) you should be aware of, and 1 of them is significant. 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.