SmarTone Telecommunications Holdings (HKG:315) Has Affirmed Its Dividend Of HK$0.175

The board of SmarTone Telecommunications Holdings Limited (HKG:315) has announced that it will pay a dividend on the 21st of November, with investors receiving HK$0.175 per share. The dividend yield will be 6.9% based on this payment which is still above the industry average.

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SmarTone Telecommunications Holdings' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 74% 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.

Over the next year, EPS could expand by 5.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

Check out our latest analysis for SmarTone Telecommunications Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was HK$0.60 in 2015, and the most recent fiscal year payment was HK$0.32. Doing the maths, this is a decline of about 6.1% per year. A company that decreases its dividend over time generally isn't what we are looking for.

SmarTone Telecommunications Holdings Could Grow Its Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. SmarTone Telecommunications Holdings has seen EPS rising for the last five years, at 5.2% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On SmarTone Telecommunications Holdings' Dividend

Overall, we think SmarTone Telecommunications Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. For instance, we've picked out 1 warning sign for SmarTone Telecommunications Holdings that investors should take into consideration. Is SmarTone Telecommunications Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.