AEON Financial Service's (TSE:8570) Dividend Will Be ¥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 makes the dividend yield 4.7%, which will augment investor returns quite nicely.

Check out our latest analysis for AEON Financial Service

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

AEON Financial Service has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on AEON Financial Service's last earnings report, the payout ratio is at a decent 73%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to rise by 16.8% over the next year. If the dividend continues on this path, the future payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from ¥70.00 total annually to ¥53.00. This works out to be a decline of approximately 2.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

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. AEON Financial Service's earnings per share has shrunk at 17% 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments AEON Financial Service has been making. We would probably look elsewhere for an income investment.

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. For example, we've picked out 2 warning signs for AEON Financial Service that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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