Hopson Development Holdings' (HKG:754) Shareholders Will Receive A Smaller Dividend Than Last Year

Hopson Development Holdings Limited's (HKG:754) dividend is being reduced to HK$0.50 on the 26th of November. The dividend yield will be in the average range for the industry at 5.4%.

View our latest analysis for Hopson Development Holdings

Hopson Development Holdings' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Hopson Development Holdings' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 45.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was HK$0.17 in 2011, and the most recent fiscal year payment was HK$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see Hopson Development Holdings has been growing its earnings per share at 45% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Hopson Development Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Hopson Development Holdings is earning enough to cover the payments, the cash flows are lacking. 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. Case in point: We've spotted 4 warning signs for Hopson Development Holdings (of which 1 is concerning!) you should know about. We have also put together a list of global stocks with a solid dividend.

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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.
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