Luks Group (Vietnam Holdings) (HKG:366) Has Announced A Dividend Of HK$0.03

Luks Group (Vietnam Holdings) Company Limited (HKG:366) will pay a dividend of HK$0.03 on the 24th of June. Including this payment, the dividend yield on the stock will be 4.7%, which is a modest boost for shareholders' returns.

See our latest analysis for Luks Group (Vietnam Holdings)

Luks Group (Vietnam Holdings)'s Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Luks Group (Vietnam Holdings) was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 5.3% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 32%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was HK$0.04 in 2012, and the most recent fiscal year payment was HK$0.06. This means that it has been growing its distributions at 4.1% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Come By

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last five years, Luks Group (Vietnam Holdings)'s earnings per share has shrunk at approximately 5.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Luks Group (Vietnam Holdings) is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Luks Group (Vietnam Holdings) you should be aware of, and 1 of them is potentially serious. 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.