CITIC Telecom International Holdings (HKG:1883) Is Increasing Its Dividend To HK$0.17

CITIC Telecom International Holdings Limited's (HKG:1883) dividend will be increasing to HK$0.17 on 13th of June. This makes the dividend yield 8.0%, which is above the industry average.

See our latest analysis for CITIC Telecom International Holdings

CITIC Telecom International Holdings' Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, CITIC Telecom International Holdings' dividend made up quite a large proportion of earnings but only 46% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 2.5% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 83%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

CITIC Telecom International Holdings 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 first annual payment during the last 10 years was HK$0.095 in 2012, and the most recent fiscal year payment was HK$0.23. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 3.2% per year. Slow growth and a high payout ratio could mean that CITIC Telecom International Holdings has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

In Summary

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. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 CITIC Telecom International Holdings analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.