AEON Financial Service (TSE:8570) Is Due To Pay A Dividend Of ¥28.00

AEON Financial Service Co., Ltd. (TSE:8570) has announced that it will pay a dividend of ¥28.00 per share on the 8th of May. This means the dividend yield will be fairly typical at 3.4%.

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AEON Financial Service's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

AEON Financial Service has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but AEON Financial Service's payout ratio of 63% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 22.4% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for AEON Financial Service

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥66.00, compared to the most recent full-year payment of ¥53.00. The dividend has shrunk at around 2.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

AEON Financial Service May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Although it's important to note that AEON Financial Service's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Growth of 0.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On AEON Financial Service's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for AEON Financial Service that you should be aware of before investing. Is AEON Financial Service not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.