HK Electric Investments and HK Electric Investments' (HKG:2638) Dividend Will Be HK$0.1609

HK Electric Investments and HK Electric Investments Limited (HKG:2638) will pay a dividend of HK$0.1609 on the 12th of April. This means the dividend yield will be fairly typical at 6.3%.

View our latest analysis for HK Electric Investments and HK Electric Investments

HK Electric Investments and HK Electric Investments' Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. 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 7.9%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 85% - on the higher side, but we wouldn't necessarily say this is unsustainable.

HK Electric Investments and HK Electric Investments' Dividend Has Lacked Consistency

HK Electric Investments and HK Electric Investments has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was HK$0.331 in 2014, and the most recent fiscal year payment was HK$0.32. The dividend has shrunk at a rate of less than 1% a year over this period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

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 2.4% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

We're Not Big Fans Of HK Electric Investments and HK Electric Investments' Dividend

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. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. Taking the debate a bit further, we've identified 2 warning signs for HK Electric Investments and HK Electric Investments that investors need to be conscious of moving forward. 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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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.