VSTECS Holdings (HKG:856) Is Paying Out A Larger Dividend Than Last Year

The board of VSTECS Holdings Limited (HKG:856) has announced that it will be increasing its dividend on the 7th of July to HK$0.27. Based on the announced payment, the dividend yield for the company will be 4.3%, which is fairly typical for the industry.

Check out our latest analysis for VSTECS Holdings

VSTECS Holdings' Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, VSTECS Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 1.9%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

VSTECS Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was HK$0.067 in 2012, and the most recent fiscal year payment was HK$0.27. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. VSTECS Holdings has seen EPS rising for the last five years, at 19% per annum. 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for VSTECS Holdings that investors need to be conscious of moving forward. 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.