CLP Holdings (HKG:2) Will Pay A Dividend Of HK$0.63

The board of CLP Holdings Limited (HKG:2) has announced that it will pay a dividend of HK$0.63 per share on the 15th of December. This means that the annual payment will be 4.8% of the current stock price, which is in line with the average for the industry.

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CLP Holdings' Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, CLP Holdings' dividend was only 70% of earnings, however it was paying out 150% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 5.7% over the next year. If the dividend continues on this path, the payout ratio could be 67% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for CLP Holdings

CLP Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was HK$2.62, compared to the most recent full-year payment of HK$3.15. This works out to be a compound annual growth rate (CAGR) of approximately 1.9% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. CLP Holdings hasn't seen much change in its earnings per share over the last five years.

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. While CLP Holdings is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for CLP Holdings that investors should know about before committing capital to this stock. 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.