Hutchison Telecommunications Hong Kong Holdings' (HKG:215) Dividend Will Be HK$0.052

Hutchison Telecommunications Hong Kong Holdings Limited (HKG:215) has announced that it will pay a dividend of HK$0.052 per share on the 26th of May. This means the annual payment is 21% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Hutchison Telecommunications Hong Kong Holdings

Hutchison Telecommunications Hong Kong Holdings Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 9,024% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 73%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is forecast to rise very quickly over the next 12 months. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 2,084%.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from HK$0.12 to HK$0.075. This works out to be a decline of approximately 4.6% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. Earnings per share has been sinking by 58% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Hutchison Telecommunications Hong Kong 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Hutchison Telecommunications Hong Kong Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.