HKT Trust and HKT (HKG:6823) Has Announced That It Will Be Increasing Its Dividend To HK$0.42

The board of HKT Trust and HKT Limited (HKG:6823) has announced that it will be increasing its dividend on the 31st of May to HK$0.42. This makes the dividend yield about the same as the industry average at 6.5%.

View our latest analysis for HKT Trust and HKT

HKT Trust and HKT Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 4.6%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 115%, which probably can't continue putting some pressure on the balance sheet.

HKT Trust and HKT Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from HK$0.034 in 2012 to the most recent annual payment of HK$0.73. This works out to be a compound annual growth rate (CAGR) of approximately 36% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, HKT Trust and HKT's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

HKT Trust and HKT's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, HKT Trust and HKT has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.