Victory Capital Holdings (NASDAQ:VCTR) Could Be A Buy For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Victory Capital Holdings, Inc. (NASDAQ:VCTR) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 9th of September in order to be eligible for this dividend, which will be paid on the 25th of September.
Victory Capital Holdings's next dividend payment will be US$0.06 per share. Last year, in total, the company distributed US$0.24 to shareholders. Calculating the last year's worth of payments shows that Victory Capital Holdings has a trailing yield of 1.3% on the current share price of $18.03. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Victory Capital Holdings can afford its dividend, and if the dividend could grow.
See our latest analysis for Victory Capital Holdings
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Victory Capital Holdings is paying out just 8.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Victory Capital Holdings's earnings have been skyrocketing, up 97% per annum for the past five years.
Unfortunately Victory Capital Holdings has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Is Victory Capital Holdings worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Victory Capital Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Victory Capital Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Victory Capital Holdings and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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