VPower Group International Holdings (HKG:1608) Is Reducing Its Dividend To HK$0.0075

By
Simply Wall St
Published
August 29, 2021
SEHK:1608
Source: Shutterstock

The board of VPower Group International Holdings Limited (HKG:1608) has announced it will be reducing its dividend by 50% on the 22nd of October, with shareholders receiving HK$0.0075. Based on this payment, the dividend yield will be 2.3%, which is lower than the average for the industry.

Check out our latest analysis for VPower Group International Holdings

VPower Group International Holdings' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, VPower Group International Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 8.9% over the next year. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

historic-dividend
SEHK:1608 Historic Dividend August 30th 2021

VPower Group International Holdings' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2017, the dividend has gone from HK$0.026 to HK$0.05. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. VPower Group International Holdings has impressed us by growing EPS at 23% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

VPower Group International Holdings Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like VPower Group International Holdings does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for VPower Group International Holdings (of which 1 is significant!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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