Henderson Land Development (HKG:12) Is Paying Out A Dividend Of HK$0.50

Henderson Land Development Company Limited's (HKG:12) investors are due to receive a payment of HK$0.50 per share on 19th of September. This means the annual payment is 8.5% of the current stock price, which is above the average for the industry.

See our latest analysis for Henderson Land Development

Henderson Land Development's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend made up a very large portion of earnings and also represented 78% 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 55.8%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 60% which brings it into quite a comfortable range.

Henderson Land Development 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 2013, the annual payment back then was HK$0.544, compared to the most recent full-year payment of HK$1.80. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Henderson Land Development's EPS has declined at around 20% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Henderson Land Development's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Henderson Land Development that you should be aware of before investing. 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.