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

CLP Holdings Limited's (HKG:2) investors are due to receive a payment of HK$0.63 per share on 15th of December. This means the dividend yield will be fairly typical at 5.8%.

Check out the opportunities and risks within the HK Electric Utilities industry.

CLP Holdings Might Find It Hard To Continue The Dividend

Solid dividend yields are great, but they only really help us if the payment is sustainable. Despite not generating a profit, CLP Holdings is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise by 66.3% over the next year. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

CLP Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was HK$2.52 in 2012, and the most recent fiscal year payment was HK$3.10. This means that it has been growing its distributions at 2.1% 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 Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 18% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for CLP Holdings that investors should take into consideration. Is CLP Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.