CK Hutchison Holdings (HKG:1) Is Paying Out A Larger Dividend Than Last Year

The board of CK Hutchison Holdings Limited (HKG:1) has announced that it will be increasing its dividend on the 16th of September to HK$0.80. This makes the dividend yield about the same as the industry average at 4.3%.

Check out our latest analysis for CK Hutchison Holdings

CK Hutchison Holdings' Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, CK Hutchison Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 14.1% over the next year. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was HK$2.70 in 2011, and the most recent fiscal year payment was HK$2.50. The dividend has shrunk at a rate of less than 1% a year over this period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

CK Hutchison Holdings May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, CK Hutchison Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, CK Hutchison Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On CK Hutchison Holdings' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for CK Hutchison Holdings (2 don't sit too well with us!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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