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Victory Capital Holdings, Inc.'s (NASDAQ:VCTR) dividend will be increasing to US$0.25 on 25th of March. This makes the dividend yield about the same as the industry average at 2.1%.
Victory Capital Holdings' Payment Has Solid Earnings Coverage
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, Victory Capital Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
EPS is set to fall by 4.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 18%, which is comfortable for the company to continue in the future.
Victory Capital Holdings Doesn't Have A Long Payment History
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2019, the first annual payment was US$0.20, compared to the most recent full-year payment of US$1.00. This implies that the company grew its distributions at a yearly rate of about 71% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Victory Capital Holdings has grown earnings per share at 51% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like Victory Capital Holdings' Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. Taking the debate a bit further, we've identified 3 warning signs for Victory Capital Holdings that investors need to be conscious of moving forward. Is Victory Capital Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.