Value Partners Group (HKG:806) Has Announced That Its Dividend Will Be Reduced To HK$0.08

Value Partners Group Limited (HKG:806) is reducing its dividend to HK$0.08 on the 25th of May. This means that the dividend yield is 2.8%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Value Partners Group

Value Partners Group's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Value Partners Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 0.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 35%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from HK$0.058 in 2012 to the most recent annual payment of HK$0.08. This implies that the company grew its distributions at a yearly rate of about 3.3% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

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. It's encouraging to see Value Partners Group has been growing its earnings per share at 25% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Value Partners 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 Value Partners Group has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain 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. Taking the debate a bit further, we've identified 3 warning signs for Value Partners Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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