CITIC Telecom International Holdings' (HKG:1883) Shareholders Will Receive A Bigger Dividend Than Last Year

CITIC Telecom International Holdings Limited's (HKG:1883) dividend will be increasing to HK$0.17 on 13th of June. This will take the annual payment from 7.8% to 7.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for CITIC Telecom International Holdings

CITIC Telecom International Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 77% of earnings, but cash flows were much higher. 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.

EPS is set to grow by 2.5% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 83%, which is on the higher side, but certainly still feasible.

CITIC Telecom International Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. 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. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.2% a year for the past five years, which isn't massive but still better than seeing them shrink. 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 is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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.