Value Partners Group (HKG:806) Is Reducing Its Dividend To HK$0.034

Value Partners Group Limited's (HKG:806) dividend is being reduced from last year's payment covering the same period to HK$0.034 on the 25th of May. This payment takes the dividend yield to 1.4%, which only provides a modest boost to overall returns.

Check out our latest analysis for Value Partners Group

Value Partners Group's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Even though Value Partners Group is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 1.4%, which makes us pretty comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was HK$0.063, compared to the most recent full-year payment of HK$0.034. The dividend has shrunk at around 6.0% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Value Partners Group's EPS has declined at around 36% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Value Partners Group's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Value Partners Group management tenure, salary, and performance. 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.