Readers hoping to buy Kerry Properties Limited (HKG:683) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 3rd of September in order to receive the dividend, which the company will pay on the 17th of September.
Kerry Properties’s next dividend payment will be HK$0.40 per share, on the back of last year when the company paid a total of HK$1.35 to shareholders. Last year’s total dividend payments show that Kerry Properties has a trailing yield of 5.0% on the current share price of HK$26.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Kerry Properties’s payout ratio is modest, at just 28% of profit. A useful secondary check can be to evaluate whether Kerry Properties generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.
It’s positive to see that Kerry Properties’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re not enthused to see that Kerry Properties’s earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Kerry Properties has delivered an average of 6.8% per year annual increase in its dividend, based on the past ten years of dividend payments.
To Sum It Up
Is Kerry Properties worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It’s definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. Overall we’re not hugely bearish on the stock, but there are likely better dividend investments out there.
Wondering what the future holds for Kerry Properties? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.