Vanov Holdings Company Limited (HKG:2260) is reducing its dividend from last year's comparable payment to CN¥0.03 on the 31st of October. Based on this payment, the dividend yield will be 2.3%, which is lower than the average for the industry.
Our free stock report includes 2 warning signs investors should be aware of before investing in Vanov Holdings. Read for free now.Vanov Holdings' Payment Could Potentially Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Vanov 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.
Looking forward, earnings per share could rise by 0.2% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Vanov Holdings
Vanov Holdings' Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2023, the dividend has gone from CN¥0.035 total annually to CN¥0.028. The dividend has fallen 20% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend's Growth Prospects Are Limited
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Unfortunately, Vanov Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
Our Thoughts On Vanov Holdings' Dividend
Even though the dividend was cut this year, we think Vanov Holdings has the ability to make consistent payments in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
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. Case in point: We've spotted 2 warning signs for Vanov Holdings (of which 1 is concerning!) you should know about. 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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