AEON Financial Service (TSE:8570) Has Announced A Dividend Of ¥25.00

AEON Financial Service Co., Ltd.'s (TSE:8570) investors are due to receive a payment of ¥25.00 per share on 14th of November. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

View our latest analysis for AEON Financial Service

AEON Financial Service's Dividend Forecasted To Be Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

AEON Financial Service has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 73%, which means that AEON Financial Service would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 90.2%. If the dividend continues along recent trends, we estimate the future payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥60.00 in 2014, and the most recent fiscal year payment was ¥53.00. Doing the maths, this is a decline of about 1.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 17% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While AEON Financial Service is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for AEON Financial Service that investors need to be conscious of moving forward. Is AEON Financial Service not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com