Hong Kong Economic Times Holdings (HKG:423) Is Paying Out A Larger Dividend Than Last Year

Hong Kong Economic Times Holdings Limited's (HKG:423) periodic dividend will be increasing on the 8th of September to HK$0.07, with investors receiving 7.7% more than last year's HK$0.065. This takes the dividend yield to 8.7%, which shareholders will be pleased with.

Check out our latest analysis for Hong Kong Economic Times Holdings

Hong Kong Economic Times Holdings Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 157% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to fall by 17.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 196%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from HK$0.088 total annually to HK$0.10. This works out to be a compound annual growth rate (CAGR) of approximately 1.3% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Hong Kong Economic Times Holdings' earnings per share has shrunk at 17% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Hong Kong Economic Times Holdings' Dividend Doesn't Look Great

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

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. Just as an example, we've come across 3 warning signs for Hong Kong Economic Times Holdings you should be aware of, and 2 of them are significant. Is Hong Kong Economic Times 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.