Powerlong Real Estate Holdings (HKG:1238) Will Pay A Larger Dividend Than Last Year At HK$0.18

Powerlong Real Estate Holdings Limited (HKG:1238) will increase its dividend on the 22nd of December to HK$0.18. This makes the dividend yield 7.9%, which is above the industry average.

Check out our latest analysis for Powerlong Real Estate Holdings

Powerlong Real Estate Holdings' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Powerlong Real Estate Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to fall by 18.4%. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the first annual payment was CN¥0.06, compared to the most recent full-year payment of CN¥0.37. This means that it has been growing its distributions at 20% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Powerlong Real Estate Holdings has seen EPS rising for the last five years, at 23% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Powerlong Real Estate Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Powerlong Real Estate Holdings' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Powerlong Real Estate Holdings is a great stock to add to your portfolio if income is your focus.

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. Just as an example, we've come across 4 warning signs for Powerlong Real Estate Holdings you should be aware of, and 2 of them are a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.