Aegon (AMS:AGN) Is Increasing Its Dividend To €0.19

Aegon Ltd. (AMS:AGN) will increase its dividend on the 7th of July to €0.19, which is 19% higher than last year's payment from the same period of €0.16. This will take the annual payment to 5.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Aegon

Aegon's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Aegon's Could Struggle to Maintain Dividend Payments In The Future

Aegon's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Aegon isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. These payout levels would generally be quite difficult to keep up.

Over the next year, EPS is forecast to expand by 190.2%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

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 an annual total of €0.22 in 2015 to the most recent total annual payment of €0.32. This implies that the company grew its distributions at a yearly rate of about 3.8% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

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. Over the past five years, it looks as though Aegon's EPS has declined at around 32% 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. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We're Not Big Fans Of Aegon's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Aegon that investors need to be conscious of moving forward. 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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