AEON Financial Service's (TSE:8570) Dividend Will Be ¥28.00

AEON Financial Service Co., Ltd.'s (TSE:8570) investors are due to receive a payment of ¥28.00 per share on 9th of May. This makes the dividend yield 4.2%, which will augment investor returns quite nicely.

View our latest analysis for AEON Financial Service

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

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. Past distributions do not necessarily guarantee future ones, but AEON Financial Service's payout ratio of 49% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 14.1% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 41% by next year, which is in a pretty sustainable range.

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 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. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. AEON Financial Service has seen earnings per share falling at 9.8% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

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 company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for AEON Financial Service that investors should take into consideration. 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.