CITIC Telecom International Holdings (HKG:1883) Has Announced That It Will Be Increasing Its Dividend To HK$0.055

CITIC Telecom International Holdings Limited (HKG:1883) has announced that it will be increasing its dividend on the 29th of September to HK$0.055, which will be 10.0% higher than last year. This takes the dividend yield from 7.9% to 8.1%, which shareholders will be pleased with.

Check out our latest analysis for CITIC Telecom International Holdings

CITIC Telecom International Holdings' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, CITIC Telecom International Holdings' dividend made up quite a large proportion of earnings but only 44% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 8.1% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

CITIC Telecom International Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from HK$0.095 to HK$0.21. This means that it has been growing its distributions at 8.3% per annum 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.

CITIC Telecom International Holdings May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Our Thoughts On CITIC Telecom International Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think CITIC Telecom International Holdings will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 1 warning sign for CITIC Telecom International Holdings that investors need to be conscious of moving forward. 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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