Aeon (M) Bhd (KLSE:AEON) Has Announced That It Will Be Increasing Its Dividend To MYR0.04

Aeon Co. (M) Bhd. (KLSE:AEON) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of June to MYR0.04. This will take the annual payment to 3.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Aeon (M) Bhd

Aeon (M) Bhd's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Aeon (M) Bhd's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 41.4% over the next year. If the dividend continues on this path, the payout ratio could be 34% 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 2013, the dividend has gone from MYR0.06 total annually to MYR0.04. The dividend has shrunk at around 4.0% a year during that period. 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.

Aeon (M) Bhd May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Aeon (M) Bhd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 1.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Aeon (M) Bhd that investors should know about before committing capital to this stock. Is Aeon (M) Bhd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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