CK Infrastructure Holdings' (HKG:1038) Dividend Will Be Increased To HK$0.71

The board of CK Infrastructure Holdings Limited (HKG:1038) has announced that it will be paying its dividend of HK$0.71 on the 13th of September, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 6.6%.

View our latest analysis for CK Infrastructure Holdings

CK Infrastructure Holdings' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, CK Infrastructure Holdings' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 272% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

The next year is set to see EPS grow by 23.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 71% which brings it into quite a comfortable range.

CK Infrastructure Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was HK$1.66 in 2013, and the most recent fiscal year payment was HK$2.54. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. CK Infrastructure Holdings has seen earnings per share falling at 6.4% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

CK Infrastructure Holdings' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think CK Infrastructure Holdings' payments are rock solid. 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for CK Infrastructure Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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