Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that AEON Credit Service (Asia) Company Limited (HKG:900) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 15th of October to receive the dividend, which will be paid on the 31st of October.
AEON Credit Service (Asia)'s upcoming dividend is HK$0.2 a share, following on from the last 12 months, when the company distributed a total of HK$0.4 per share to shareholders. Looking at the last 12 months of distributions, AEON Credit Service (Asia) has a trailing yield of approximately 7.0% on its current stock price of HK$6.32. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether AEON Credit Service (Asia) can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see AEON Credit Service (Asia) paying out a modest 46% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see AEON Credit Service (Asia)'s earnings per share have risen 12% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AEON Credit Service (Asia) has delivered 3.2% dividend growth per year on average over the past ten years. Earnings per share have been growing much quicker than dividends, potentially because AEON Credit Service (Asia) is keeping back more of its profits to grow the business.
The Bottom Line
Is AEON Credit Service (Asia) an attractive dividend stock, or better left on the shelf? Companies like AEON Credit Service (Asia) that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, AEON Credit Service (Asia) appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Want to learn more about AEON Credit Service (Asia)? Here's a visualisation of its historical rate of revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.