HK Electric Investments and HK Electric Investments Limited (HKG:2638) will pay a dividend of HK$0.16 on the 11th of April. This means the dividend yield will be fairly typical at 4.1%.
HK Electric Investments and HK Electric Investments' Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Over the next year, EPS is forecast to expand by 1.9%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.
HK Electric Investments and HK Electric Investments' Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from HK$0.33 in 2014 to the most recent annual payment of HK$0.32. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though HK Electric Investments and HK Electric Investments' EPS has declined at around 4.0% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. 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.
HK Electric Investments and HK Electric Investments' Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help HK Electric Investments and HK Electric Investments make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for HK Electric Investments and HK Electric Investments that investors should take into consideration. Is HK Electric Investments and HK Electric Investments not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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HK Electric Investments and HK Electric Investments
HK Electric Investments and HK Electric Investments Limited, an investment holding company, engages in the generation, transmission, distribution, and supply of electricity in Hong Kong Island and Lamma Island.
Solid track record and slightly overvalued.