Stock Analysis

AEON Credit Service (M) Berhad (KLSE:AEONCR) Is Increasing Its Dividend To RM0.28

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The board of AEON Credit Service (M) Berhad (KLSE:AEONCR) has announced that it will be increasing its dividend by 210% on the 3rd of November to RM0.28. This will take the dividend yield from 2.4% to 3.9%, providing a nice boost to shareholder returns.

See our latest analysis for AEON Credit Service (M) Berhad

AEON Credit Service (M) Berhad's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, AEON Credit Service (M) Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 6.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.

KLSE:AEONCR Historic Dividend September 30th 2021

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from RM0.15 in 2011 to the most recent annual payment of RM0.29. This implies that the company grew its distributions at a yearly rate of about 7.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

AEON Credit Service (M) Berhad Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see AEON Credit Service (M) Berhad has been growing its earnings per share at 6.3% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, AEON Credit Service (M) Berhad has 2 warning signs (and 1 which is potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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