Victory Securities (Holdings)'s (HKG:8540) Dividend Will Be HK$0.013

The board of Victory Securities (Holdings) Company Limited (HKG:8540) has announced that it will pay a dividend on the 10th of September, with investors receiving HK$0.013 per share. This means the annual payment will be 1.2% of the current stock price, which is lower than the industry average.

See our latest analysis for Victory Securities (Holdings)

Victory Securities (Holdings)'s Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Victory Securities (Holdings) was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 49.9% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

Victory Securities (Holdings) Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2018, the first annual payment was HK$0.02, compared to the most recent full-year payment of HK$0.03. This means that it has been growing its distributions at 14% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Victory Securities (Holdings) has been growing its earnings per share at 50% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Victory Securities (Holdings) (of which 2 are potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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