SmarTone Telecommunications Holdings' (HKG:315) Shareholders Will Receive A Bigger Dividend Than Last Year

SmarTone Telecommunications Holdings Limited (HKG:315) has announced that it will be increasing its dividend on the 19th of November to HK$0.15, which will be 3.3% higher than last year. This takes the dividend yield from 6.6% to 6.6%, which shareholders will be pleased with.

Check out our latest analysis for SmarTone Telecommunications Holdings

SmarTone Telecommunications Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, SmarTone Telecommunications Holdings' dividend made up quite a large proportion of earnings but only 21% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 17.0% over the next 12 months. If recent patterns in the dividend continue, we could see the payout ratio reaching 82% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from HK$0.35 to HK$0.30. The dividend has shrunk at around 1.5% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 12% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for SmarTone Telecommunications Holdings you should be aware of, and 1 of them shouldn't be ignored. We have also put together a list of global stocks with a solid dividend.

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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.
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