Virtu Financial, Inc. (NASDAQ:VIRT) will pay a dividend of US$0.24 on the 15th of June. The dividend yield will be 3.3% based on this payment which is still above the industry average.
Virtu Financial's Earnings Easily Cover the Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Virtu Financial's 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.
EPS is set to fall by 32.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 29%, which is comfortable for the company to continue in the future.
Virtu Financial Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. There hasn't been much of a change in the dividend over the last 6. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
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. Virtu Financial has seen EPS rising for the last five years, at 44% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Virtu Financial Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Virtu Financial might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We do should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Virtu Financial has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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