VSTECS Holdings' (HKG:856) Dividend Will Be Increased To HK$0.27

VSTECS Holdings Limited (HKG:856) has announced that it will be increasing its dividend on the 7th of July to HK$0.27. Despite this raise, the dividend yield of 4.0% is only a modest boost to shareholder returns.

See our latest analysis for VSTECS Holdings

VSTECS Holdings' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, VSTECS Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 1.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

VSTECS Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from HK$0.067 in 2012 to the most recent annual payment of HK$0.27. This means that it has been growing its distributions at 15% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see VSTECS Holdings has been growing its earnings per share at 19% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for VSTECS Holdings' prospects of growing its dividend payments in the future.

VSTECS Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on VSTECS Holdings management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.