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Hongkong Land Holdings (SGX:H78) Is Paying Out A Dividend Of $0.16

Hongkong Land Holdings Limited (SGX:H78) has announced that it will pay a dividend of $0.16 per share on the 15th of May. Based on this payment, the dividend yield on the company's stock will be 6.8%, which is an attractive boost to shareholder returns.

See our latest analysis for Hongkong Land Holdings

Hongkong Land Holdings Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Hongkong Land Holdings is not generating a profit, and despite this is paying out most of its free cash flow as a dividend. Generally it is unsustainable for a company to be paying a dividend while unprofitable, and with limited reinvestment into the business growth may be slow.

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The next 12 months is set to see EPS grow by 184.1%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 102% over the next year.

historic-dividend
historic-dividend

Hongkong Land Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.17 in 2014, and the most recent fiscal year payment was $0.22. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Hongkong Land Holdings' earnings per share has shrunk at 21% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Hongkong Land Holdings' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hongkong Land Holdings' payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Hongkong Land Holdings that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.