Sun Hung Kai Properties (HKG:16) Has Affirmed Its Dividend Of HK$1.25

Sun Hung Kai Properties Limited (HKG:16) will pay a dividend of HK$1.25 on the 16th of March. This means that the annual payment will be 4.6% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Sun Hung Kai Properties

Sun Hung Kai Properties' Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Sun Hung Kai Properties was paying out quite a large proportion of both earnings and cash flow, with the dividend being 126% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 69.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 47% which would be quite comfortable going to take the dividend forward.

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 dividend has gone from an annual total of HK$3.35 in 2013 to the most recent total annual payment of HK$4.95. This implies that the company grew its distributions at a yearly rate of about 4.0% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Sun Hung Kai Properties' EPS has fallen by approximately 19% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Sun Hung Kai Properties that you should be aware of before investing. 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.