AEON Financial Service (TSE:8570) Will Pay A Dividend Of ¥25.00

AEON Financial Service Co., Ltd.'s (TSE:8570) investors are due to receive a payment of ¥25.00 per share on 14th of November. This makes the dividend yield 3.8%, which will augment investor returns quite nicely.

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AEON Financial Service's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

AEON Financial Service has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but AEON Financial Service's payout ratio of 59% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to expand by 16.6%. If the dividend continues on this path, the future payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for AEON Financial Service

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from ¥60.00 total annually to ¥53.00. The dividend has shrunk at around 1.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. AEON Financial Service's earnings per share has shrunk at 12% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

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

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. As an example, we've identified 1 warning sign for AEON Financial Service that you should be aware of before investing. 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.