China Telecom (HKG:728) Is Due To Pay A Dividend Of CN¥0.1006

China Telecom Corporation Limited (HKG:728) will pay a dividend of CN¥0.1006 on the 18th of July. The payment will take the dividend yield to 4.9%, which is in line with the average for the industry.

We've discovered 1 warning sign about China Telecom. View them for free.

China Telecom's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, China Telecom was paying out 71% of earnings, but a comparatively small 56% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 30.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

View our latest analysis for China Telecom

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CN¥0.0759, compared to the most recent full-year payment of CN¥0.26. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

China Telecom Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. China Telecom has impressed us by growing EPS at 5.9% per year over the past three years. 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.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For example, we've picked out 1 warning sign for China Telecom that investors should know about before committing capital to this stock. 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.