HKT Trust and HKT's (HKG:6823) Dividend Will Be Increased To HK$0.42

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 takes the dividend yield from 6.8% to 6.8%, which shareholders will be pleased with.

Check out our latest analysis for HKT Trust and HKT

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 4.0% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 116%, which is a bit high and could start applying pressure to the balance sheet.

HKT Trust and HKT Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from HK$0.034 in 2012 to the most recent annual payment of HK$0.73. This implies that the company grew its distributions at a yearly rate of about 36% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. HKT Trust and HKT hasn't seen much change in its earnings per share over the last five years.

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

Overall, we always like to see the dividend being raised, but we don't think HKT Trust and HKT will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.

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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.