AEON Financial Service (TSE:8570) Will Pay A Dividend Of ¥25.00

The board of AEON Financial Service Co., Ltd. (TSE:8570) has announced that it will pay a dividend of ¥25.00 per share on the 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 Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

AEON Financial Service has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but AEON Financial Service's payout ratio of 73% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 91.0% over the next year. 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 dividend has gone from an annual total of ¥60.00 in 2014 to the most recent total annual payment of ¥53.00. The dividend has shrunk at around 1.2% 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.

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. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into 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.

Our Thoughts On AEON Financial Service's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about AEON Financial Service's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments AEON Financial Service has been making. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs 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.