Bright Smart Securities & Commodities Group (HKG:1428) Is Paying Out Less In Dividends Than Last Year

Bright Smart Securities & Commodities Group Limited's (HKG:1428) dividend is being reduced to HK$0.13 on the 9th of September. However, the dividend yield of 6.8% is still a decent boost to shareholder returns.

View our latest analysis for Bright Smart Securities & Commodities Group

Bright Smart Securities & Commodities Group's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Bright Smart Securities & Commodities Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 16.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from HK$0.018 to HK$0.13. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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. It's encouraging to see Bright Smart Securities & Commodities Group has been growing its earnings per share at 17% a year over the past five years. Bright Smart Securities & Commodities Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Bright Smart Securities & Commodities Group's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Bright Smart Securities & Commodities Group 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Bright Smart Securities & Commodities Group (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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