Hang Lung Properties (HKG:101) Will Pay A Dividend Of HK$0.60

The board of Hang Lung Properties Limited (HKG:101) has announced that it will pay a dividend on the 14th of June, with investors receiving HK$0.60 per share. This makes the dividend yield 9.0%, which will augment investor returns quite nicely.

See our latest analysis for Hang Lung Properties

Hang Lung Properties' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Hang Lung Properties' was paying out quite a large proportion of earnings and 77% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

The next year is set to see EPS grow by 33.3%. 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 a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of HK$0.74 in 2014 to the most recent total annual payment of HK$0.78. Its dividends have grown at less than 1% per annum over this time frame. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 13% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Our Thoughts On Hang Lung Properties' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hang Lung Properties' payments, as there could be some issues with sustaining them into the future. 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.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 14 analysts we track are forecasting for the future. Is Hang Lung Properties 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.