Hang Lung Properties (HKG:101) Is Due To Pay A Dividend Of HK$0.60

Hang Lung Properties Limited's (HKG:101) investors are due to receive a payment of HK$0.60 per share on 14th of June. This means the annual payment is 9.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Hang Lung Properties

Hang Lung Properties' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up a very large portion of earnings and also represented 77% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 32.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 67% which would be quite comfortable going to take the dividend forward.

Hang Lung Properties Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was HK$0.74, compared to the most recent full-year payment of HK$0.78. Dividend payments have been growing, but very slowly over the period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Hang Lung Properties' earnings per share has shrunk at 13% 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.