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CLP Holdings Ltd's Dividend Analysis

Dissecting CLP Holdings Ltd's Upcoming Dividend and Its Historical Performance

CLP Holdings Ltd (CLPHY) recently announced a dividend of $0.16 per share, payable on 2024-03-28, with the ex-dividend date set for 2024-03-08. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into CLP Holdings Ltd's dividend performance and assess its sustainability.

What Does CLP Holdings Ltd Do?

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CLP Holdings is the larger of the two electric utility companies in Hong Kong, serving 80% of the city population. It generates, transmits, and distributes electricity to about 2.6 million customers in Kowloon and the New Territories through its wholly owned network. The business is regulated by the Hong Kong government with a permitted return on net fixed asset of 8.00%. Besides Hong Kong, the company has expanded its reach overseas, with generation and retail assets in Australia and generation assets in China, India, Taiwan, and Southeast Asia. Its Hong Kong activities made up more than 80% of recurring net profit in 2021.

CLP Holdings Ltd's Dividend Analysis
CLP Holdings Ltd's Dividend Analysis

A Glimpse at CLP Holdings Ltd's Dividend History

CLP Holdings Ltd has maintained a consistent dividend payment record since 2010. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.

CLP Holdings Ltd's Dividend Analysis
CLP Holdings Ltd's Dividend Analysis

Breaking Down CLP Holdings Ltd's Dividend Yield and Growth

As of today, CLP Holdings Ltd currently has a 12-month trailing dividend yield of 4.72% and a 12-month forward dividend yield of 4.73%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, CLP Holdings Ltd's annual dividend growth rate was 0.20%. Extended to a five-year horizon, this rate increased to 1.50% per year. And over the past decade, CLP Holdings Ltd's annual dividends per share growth rate stands at 2.40%.

Based on CLP Holdings Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of CLP Holdings Ltd stock as of today is approximately 5.08%.

CLP Holdings Ltd's Dividend Analysis
CLP Holdings Ltd's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, CLP Holdings Ltd's dividend payout ratio is 1.52, which may suggest that the company's dividend may not be sustainable.

CLP Holdings Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks CLP Holdings Ltd's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. CLP Holdings Ltd's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.

Revenue is the lifeblood of any company, and CLP Holdings Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. CLP Holdings Ltd's revenue has increased by approximately 5.50% per year on average, a rate that underperforms approximately 63.66% of global competitors.

The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, CLP Holdings Ltd's earnings increased by approximately 26.60% per year on average, a rate that underperforms approximately 17.72% of global competitors.

Lastly, the company's 5-year EBITDA growth rate of -11.80%, which underperforms approximately 84.18% of global competitors, raises concerns about its long-term ability to sustain dividend growth.

Concluding Thoughts on CLP Holdings Ltd's Dividend Profile

Considering CLP Holdings Ltd's upcoming dividend payment, its historical consistency in dividend distribution, and its forward-looking yield expectations, the stock presents an interesting case for income-focused investors. However, the sustainability of its dividends, as suggested by the payout ratio and mixed growth metrics, indicates that investors should approach with caution and closely monitor the company's financial health. The robust profitability rank does offer some reassurance regarding the company's earnings capacity. Ultimately, value investors must weigh the potential benefits of CLP Holdings Ltd's dividend against the risks associated with its growth and payout ratio to determine if it aligns with their investment strategy.

GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.