Hang Lung Properties (HKG:101) Will Pay A Dividend Of HK$0.18

Hang Lung Properties Limited (HKG:101) has announced that it will pay a dividend of HK$0.18 per share on the 29th of September. This means the annual payment is 7.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Hang Lung Properties

Hang Lung Properties' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend made up a very large portion of earnings and also represented 85% 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.

The next year is set to see EPS grow by 41.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 58% which would be quite comfortable going to take the dividend forward.

Hang Lung Properties Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from HK$0.34 total annually to HK$0.78. This means that it has been growing its distributions at 8.7% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Hang Lung Properties' EPS has fallen by approximately 14% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.

Our Thoughts On Hang Lung Properties' Dividend

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. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.