Aeon Co. (M) Bhd.'s (KLSE:AEON) dividend will be increasing from last year's payment of the same period to MYR0.04 on 15th of June. This takes the dividend yield to 3.2%, which shareholders will be pleased with.
View our latest analysis for Aeon (M) Bhd
Aeon (M) Bhd'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. Based on the last payment, Aeon (M) Bhd was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
The next year is set to see EPS grow by 41.4%. 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
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was MYR0.06, compared to the most recent full-year payment of MYR0.04. This works out to be a decline of approximately 4.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend's Growth Prospects Are Limited
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. Growth of 1.2% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Aeon (M) Bhd that investors need to be conscious of moving forward. Is Aeon (M) Bhd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.