CK Infrastructure Holdings' (HKG:1038) Upcoming Dividend Will Be Larger Than Last Year's

CK Infrastructure Holdings Limited (HKG:1038) has announced that it will be increasing its dividend on the 15th of September to HK$0.69. The announced payment will take the dividend yield to 5.3%, which is in line with the average for the industry.

Check out our latest analysis for CK Infrastructure Holdings

CK Infrastructure Holdings' Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. 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 184% 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 18.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

CK Infrastructure Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was HK$1.33 in 2011, and the most recent fiscal year payment was HK$2.48. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Come By

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. It's not great to see that CK Infrastructure Holdings' earnings per share has fallen at approximately 8.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think CK Infrastructure Holdings' payments are rock solid. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think CK Infrastructure Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Looking for more high-yielding dividend ideas? Try our curated list 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.
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