AEON Financial Service Co., Ltd.'s (TSE:8570) investors are due to receive a payment of ¥28.00 per share on 9th of May. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.
Check out our latest analysis for AEON Financial Service
AEON Financial Service's Earnings Will Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Having distributed dividends for at least 10 years, AEON Financial Service has a long history of paying out a part of its earnings to shareholders. Based on AEON Financial Service's last earnings report, the payout ratio is at a decent 49%, 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 13.5% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 42% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥70.00, compared to the most recent full-year payment of ¥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 May Be Hard To Come By
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. Over the past five years, it looks as though AEON Financial Service's EPS has declined at around 9.8% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On AEON Financial Service's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for AEON Financial Service that investors should take into consideration. Is AEON Financial Service not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your 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.
About TSE:8570
AEON Financial Service
Through its subsidiaries, provides various financial services in Japan.
Undervalued with adequate balance sheet.
