Hang Lung Properties (HKG:101) Will Pay A Dividend Of HK$0.60

The board of Hang Lung Properties Limited (HKG:101) has announced that it will pay a dividend of HK$0.60 per share on the 19th of May. Based on this payment, the dividend yield will be 5.0%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Hang Lung Properties' stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Hang Lung Properties

Hang Lung Properties' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Hang Lung Properties' was paying out quite a large proportion of earnings and 78% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

The next year is set to see EPS grow by 71.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 54% which would be quite comfortable going to take the dividend forward.

Hang Lung Properties Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was HK$0.34, compared to the most recent full-year payment of HK$0.78. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

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. 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. 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, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

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. For example, we've picked out 1 warning sign for Hang Lung Properties that investors should know about before committing capital to this stock. 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.