Looking for a good dividend stock? Here’s why investors should consider AIA Group Ltd (SEHK: 1299). –
AIA Group Ltd (SEHK: 1299) is one of the largest life insurance groups in Asia, with a presence in 18 markets across the Asia-Pacific region.
In this article, I want to assess whether AIA’s stock is suitable for dividend investors. I will look into two important aspects.
To sustain dividend payments over a long period, AIA must have a good business model to maintain its long-term profitability. Fortunately, I think it has a high-quality business.
To start with, AIA operates a diversified business spanning across multiple countries. By diversifying its risks across 18 markets in the Asia-Pacific region, AIA reduces its dependence on any specific country, which improves the sustainability of its income over time.
Moreover, it also has a proven track record of growing its business over the long-term – operating profit after tax grew from US$1.9 billion in 2011 to US$5.7 billion in 2019, or a compound annual growth rate (CAGR) 14.7%. Such a result is admirable if we consider the size of AIA’s business.
As for the future, the company is well-positioned to benefit from tailwinds that include low insurance penetration across the Asia-Pacific region, as well as the growing GDP in Asia.
Dividend track record
From the above, we have learned about AIA’s solid historical financial performance over almost a decade.
Still, dividend investors will find it useless unless AIA has demonstrated its willingness to pay out good dividends. Here, investors are looking for a good dividend track record over a long period of time.
So how did the company perform from this perspective? Reasonably well. From 2011 to 2019, AIA has grown its dividend per share (DPS) from 33 Hong Kong cents in 2011 to 126.6 Hong Kong cents in 2019, or a CAGR of 18.3%.
The above is good news for dividend investors since they can expect AIA to continue paying stable dividends, so long as the company can sustain its business performance.
In all, I think AIA is a worthy candidate for dividend investors to explore further, especially since it exhibits a strong business and dividend track record for over almost a decade.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.
The Motley Fool Hong Kong Limited(www.fool.hk) 2020