AEON Credit Service (M) Berhad (KLSE:AEONCR) Has Announced A Dividend Of MYR0.14

The board of AEON Credit Service (M) Berhad (KLSE:AEONCR) has announced that it will pay a dividend of MYR0.14 per share on the 25th of July. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for AEON Credit Service (M) Berhad

AEON Credit Service (M) Berhad's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, AEON Credit Service (M) Berhad's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 23.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from MYR0.139 total annually to MYR0.283. This means that it has been growing its distributions at 7.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. AEON Credit Service (M) Berhad might have put its house in order since then, but we remain cautious.

AEON Credit Service (M) Berhad May Find It Hard To Grow The Dividend

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. Earnings have grown at around 4.0% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, AEON Credit Service (M) Berhad has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On AEON Credit Service (M) Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about AEON Credit Service (M) Berhad's payments, as there could be some issues with sustaining them into the future. While AEON Credit Service (M) Berhad is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 identified 2 warning signs for AEON Credit Service (M) Berhad (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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