CK Infrastructure Holdings (HKG:1038) Is Paying Out A Larger Dividend Than Last Year

CK Infrastructure Holdings Limited (HKG:1038) will increase its dividend on the 13th of September to HK$0.71, which is 1.4% higher than last year's payment from the same period of HK$0.70. This makes the dividend yield about the same as the industry average at 6.4%.

Check out our latest analysis for CK Infrastructure Holdings

CK Infrastructure Holdings' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. 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 515% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

The next year is set to see EPS grow by 24.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 70% which would be quite comfortable going to take the dividend forward.

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. Since 2013, the dividend has gone from HK$1.66 total annually to HK$2.53. This means that it has been growing its distributions at 4.3% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. In the last five years, CK Infrastructure Holdings' earnings per share has shrunk at approximately 6.4% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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

Overall, we always like to see the dividend being raised, but we don't think CK Infrastructure Holdings 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for CK Infrastructure Holdings that investors need to be conscious of moving forward. Is CK Infrastructure Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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