Guangdong Investment's (HKG:270) Shareholders Will Receive A Bigger Dividend Than Last Year

Guangdong Investment Limited's (HKG:270) dividend will be increasing on the 28th of October to HK$0.18, with investors receiving 3.0% more than last year. Based on the announced payment, the dividend yield for the company will be 5.9%, which is fairly typical for the industry.

Check out our latest analysis for Guangdong Investment

Guangdong Investment's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.

EPS is set to grow by 16.0% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 77%, which is on the higher side, but certainly still feasible.

Guangdong Investment Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was HK$0.15 in 2011, and the most recent fiscal year payment was HK$0.59. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 3.5% per annum over the last five years, which admittedly is a bit slow. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Guangdong Investment will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for Guangdong Investment for free with public analyst estimates for the company. 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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