Tsim Sha Tsui Properties (HKG:247) Has Announced A Dividend Of HK$0.43

The board of Tsim Sha Tsui Properties Limited (HKG:247) has announced that it will pay a dividend of HK$0.43 per share on the 3rd of December. Including this payment, the dividend yield on the stock will be 3.1%, which is a modest boost for shareholders' returns.

See our latest analysis for Tsim Sha Tsui Properties

Tsim Sha Tsui Properties' Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Tsim Sha Tsui Properties' dividend was only 48% of earnings, however it was paying out 107% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Unless the company can turn things around, EPS could fall by 10.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 56%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Tsim Sha Tsui Properties Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was HK$0.50, compared to the most recent full-year payment of HK$0.58. This means that it has been growing its distributions at 1.5% per annum 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

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Tsim Sha Tsui Properties' EPS has declined at around 10% 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.

Our Thoughts On Tsim Sha Tsui Properties' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tsim Sha Tsui Properties' payments, as there could be some issues with sustaining them into the future. While Tsim Sha Tsui Properties is earning enough to cover the payments, the cash flows are lacking. We don't think Tsim Sha Tsui Properties is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Tsim Sha Tsui Properties 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.