CK Hutchison Holdings' (HKG:1) Upcoming Dividend Will Be Larger Than Last Year's

The board of CK Hutchison Holdings Limited (HKG:1) has announced that it will be increasing its dividend on the 9th of June to HK$1.86. The announced payment will take the dividend yield to 4.6%, which is in line with the average for the industry.

Check out our latest analysis for CK Hutchison Holdings

CK Hutchison Holdings' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, based ont he last payment, CK Hutchison Holdings was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 4.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was HK$2.98 in 2012, and the most recent fiscal year payment was HK$2.66. This works out to be a decline of approximately 1.1% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

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. However, CK Hutchison Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On CK Hutchison Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While CK Hutchison Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think CK Hutchison Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for CK Hutchison Holdings that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.