Sun Hung Kai Properties' (HKG:16) Dividend Will Be HK$2.80

Sun Hung Kai Properties Limited's (HKG:16) investors are due to receive a payment of HK$2.80 per share on 20th of November. Including this payment, the dividend yield on the stock will be 3.9%, which is a modest boost for shareholders' returns.

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Sun Hung Kai Properties' Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Sun Hung Kai Properties was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 34.1%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Sun Hung Kai Properties

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from HK$3.35 total annually to HK$3.75. This means that it has been growing its distributions at 1.1% per annum 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's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Sun Hung Kai Properties' earnings per share has shrunk at approximately 3.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Sun Hung Kai Properties that investors need to be conscious of moving forward. Is Sun Hung Kai 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.