Sun Hung Kai Properties' (HKG:16) Dividend Will Be HK$3.70

Sun Hung Kai Properties Limited (HKG:16) has announced that it will pay a dividend of HK$3.70 per share on the 16th of November. This payment means that the dividend yield will be 5.6%, which is around the industry average.

View our latest analysis for Sun Hung Kai Properties

Sun Hung Kai Properties' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite comfortably covered by Sun Hung Kai Properties' earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 94% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 29.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sun Hung Kai 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. The annual payment during the last 10 years was HK$3.35 in 2013, and the most recent fiscal year payment was HK$4.95. This works out to be a compound annual growth rate (CAGR) of approximately 4.0% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 14% 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 Sun Hung Kai Properties' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sun Hung Kai Properties' payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Sun Hung Kai Properties has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 1 warning sign for Sun Hung Kai Properties that you should be aware of before investing. 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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