Sun Hung Kai Properties (HKG:16) Has Announced A Dividend Of HK$3.70

Sun Hung Kai Properties Limited (HKG:16) will pay a dividend of HK$3.70 on the 16th of November. This means that the annual payment will be 6.1% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Sun Hung Kai Properties

Sun Hung Kai Properties' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Sun Hung Kai Properties was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to rise by 26.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

Sun Hung Kai 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$3.35 total annually to HK$4.95. This works out to be a compound annual growth rate (CAGR) of approximately 4.0% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Sun Hung Kai Properties' EPS has declined at around 14% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.