SmarTone Telecommunications Holdings (HKG:315) Has Announced A Dividend Of HK$0.145

SmarTone Telecommunications Holdings Limited (HKG:315) has announced that it will pay a dividend of HK$0.145 per share on the 21st of March. The dividend yield will be 7.5% based on this payment which is still above the industry average.

See our latest analysis for SmarTone Telecommunications Holdings

SmarTone Telecommunications Holdings' Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by SmarTone Telecommunications Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 16.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.36 in 2015, and the most recent fiscal year payment was HK$0.32. This works out to be a decline of approximately 1.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

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. Over the past five years, it looks as though SmarTone Telecommunications Holdings' EPS has declined at around 2.8% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On SmarTone Telecommunications Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SmarTone Telecommunications Holdings' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, SmarTone Telecommunications Holdings has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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.