Guangdong Investment's (HKG:270) Upcoming Dividend Will Be Larger Than Last Year's

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 5.7%, which is fairly typical for the industry.

Check out our latest analysis for Guangdong Investment

Guangdong Investment's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Guangdong Investment was paying out quite a large proportion of both earnings and cash flow, with the dividend being 720% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 16.0%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 78%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Guangdong Investment Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was HK$0.15, compared to the most recent full-year payment of 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 3.5% per year. Guangdong Investment's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 Guangdong Investment analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.
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