APT Satellite Holdings' (HKG:1045) Dividend Will Be HK$0.05

APT Satellite Holdings Limited (HKG:1045) will pay a dividend of HK$0.05 on the 11th of October. This means the annual payment is 10.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for APT Satellite Holdings

APT Satellite Holdings Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 95% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Looking forward, EPS could fall by 16.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 131%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was HK$0.04, compared to the most recent full-year payment of HK$0.22. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year 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.

Dividend Growth Potential Is Shaky

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. APT Satellite Holdings' earnings per share has shrunk at 17% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think APT Satellite Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, APT Satellite Holdings has 2 warning signs (and 1 which is potentially serious) we think you should know about. Is APT Satellite Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.