CITIC Telecom International Holdings (HKG:1883) Is Increasing Its Dividend To HK$0.06

CITIC Telecom International Holdings Limited (HKG:1883) will increase its dividend on the 30th of September to HK$0.06, which is 9.1% higher than last year's payment from the same period of HK$0.055. The payment will take the dividend yield to 8.1%, which is in line with the average for the industry.

Check out our latest analysis for CITIC Telecom International Holdings

CITIC Telecom International Holdings' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, CITIC Telecom International Holdings was paying out 76% of earnings, but a comparatively small 43% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 14.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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. Since 2012, the dividend has gone from HK$0.096 total annually to HK$0.225. This means that it has been growing its distributions at 8.9% 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.

The Dividend's Growth Prospects Are Limited

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. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. 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.

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 is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think CITIC Telecom International Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in CITIC Telecom International Holdings in our latest insider ownership analysis. 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.