CLP Holdings (HKG:2) Is Due To Pay A Dividend Of HK$0.63

CLP Holdings Limited (HKG:2) will pay a dividend of HK$0.63 on the 15th of December. This means that the annual payment will be 4.1% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for CLP Holdings

CLP 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. Before making this announcement, CLP Holdings' was paying out quite a large proportion of earnings and 76% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Looking forward, earnings per share is forecast to rise by 16.8% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

CLP Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the first annual payment was HK$2.48, compared to the most recent full-year payment of HK$3.10. This means that it has been growing its distributions at 2.3% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, CLP Holdings' earnings per share has shrunk at approximately 8.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On CLP Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about CLP Holdings' payments, as there could be some issues with sustaining them into the future. 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. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for CLP Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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