AEON Mall (TSE:8905) Is Paying Out A Dividend Of ¥25.00

AEON Mall Co., Ltd. (TSE:8905) will pay a dividend of ¥25.00 on the 7th of May. Based on this payment, the dividend yield will be 2.5%, which is fairly typical for the industry.

View our latest analysis for AEON Mall

AEON Mall's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, AEON Mall's dividend made up quite a large proportion of earnings but only 18% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 19.7% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 55% which would be quite comfortable going to take the dividend forward.

AEON Mall Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥50.00. This means that it has been growing its distributions at 8.6% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though AEON Mall's EPS has declined at around 12% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

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 has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think AEON Mall is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for AEON Mall 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.