Sun Hung Kai Properties (HKG:16) Has Announced A Dividend Of HK$2.80

The board of Sun Hung Kai Properties Limited (HKG:16) has announced that it will pay a dividend of HK$2.80 per share on the 20th of November. Including this payment, the dividend yield on the stock will be 4.1%, which is a modest boost for shareholders’ returns.

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Sun Hung Kai Properties’ Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Sun Hung Kai Properties’ dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 35.0%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Sun Hung Kai Properties

Dividend Volatility

The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$3.35 in 2015, and the most recent fiscal year payment was HK$3.75. This implies that the company grew its distributions at a yearly rate of about 1.1% over that duration. It’s encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Sun Hung Kai Properties May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it’s even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Sun Hung Kai Properties’ earnings per share has shrunk at approximately 3.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Sun Hung Kai Properties’ payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

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 instance, we’ve picked out 1 warning sign for Sun Hung Kai Properties that investors should take into consideration. Is Sun Hung Kai Properties 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.