Vector (NZSE:VCT) Has Announced That It Will Be Increasing Its Dividend To NZ$0.1475
The board of Vector Limited (NZSE:VCT) has announced that it will be paying its dividend of NZ$0.1475 on the 16th of September, an increased payment from last year's comparable dividend. This takes the dividend yield to 6.7%, which shareholders will be pleased with.
View our latest analysis for Vector
Vector Is Paying Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Vector was paying out 287% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.
EPS is forecast to rise very quickly over the next 12 months. Assuming the dividend continues along recent trends, we could see the payout ratio reach 100%, which is on the unsustainable side.
Vector Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from NZ$0.153 total annually to NZ$0.26. This means that it has been growing its distributions at 5.5% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Vector May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. However, Vector's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Vector will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Vector has 3 warning signs (and 1 which can't be ignored) we think 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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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.