Bright Smart Securities & Commodities Group's (HKG:1428) Dividend Is Being Reduced To HK$0.10

Bright Smart Securities & Commodities Group Limited (HKG:1428) is reducing its dividend to HK$0.10 on the 9th of September. The yield is still above the industry average at 7.4%.

Check out our latest analysis for Bright Smart Securities & Commodities Group

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

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Bright Smart Securities & Commodities Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 15.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was HK$0.018 in 2012, and the most recent fiscal year payment was HK$0.10. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Bright Smart Securities & Commodities Group has seen EPS rising for the last five years, at 16% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Bright Smart Securities & Commodities Group's prospects of growing its dividend payments in the future.

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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Bright Smart Securities & Commodities Group that investors should know about before committing capital to this stock. Is Bright Smart Securities & Commodities Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.