Bright Smart Securities & Commodities Group's (HKG:1428) Shareholders Will Receive A Smaller Dividend Than Last Year

Bright Smart Securities & Commodities Group Limited (HKG:1428) has announced that on 9th of September, it will be paying a dividend ofHK$0.10, which a reduction from last year's comparable dividend. However, the dividend yield of 7.2% is still a decent boost to shareholder returns.

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

Bright Smart Securities & Commodities Group's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Bright Smart Securities & Commodities Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 15.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

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 dividend has gone from an annual total of HK$0.018 in 2012 to the most recent total annual payment of 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. 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.

Bright Smart Securities & Commodities Group Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Bright Smart Securities & Commodities Group has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Bright Smart Securities & Commodities Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.