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HK Electric Investments and HK Electric Investments Ltd's Dividend Analysis

Assessing the Dividend Performance of HK Electric Investments and HK Electric Investments Ltd

HK Electric Investments and HK Electric Investments Ltd (HKCVF) recently announced a dividend of $0.16 per share, payable on 2024-04-17, with the ex-dividend date set for 2024-04-05. 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 HK Electric Investments and HK Electric Investments Ltd's dividend performance and assess its sustainability.

What Does HK Electric Investments and HK Electric Investments Ltd Do?

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HK Electric Investments and HK Electric Investments Ltd is a fixed single investment trust in Hong Kong with a focus on the power industry. The Company is a vertically integrated power utility and its operations comprise the generation, transmission, distribution and supply of electricity to Hong Kong Island and Lamma Island. Its principal operating subsidiary is The Hongkong Electric Company, Limited (HEC). HEC's sole power generation facility is the Lamma Power Station which has an aggregate installed capacity of approximately 3,700 megawatts (MW). The Company provides electricity to approximately 568,000 registered customers on Hong Kong Island and Lamma Island.

HK Electric Investments and HK Electric Investments Ltd's Dividend Analysis
HK Electric Investments and HK Electric Investments Ltd's Dividend Analysis

A Glimpse at HK Electric Investments and HK Electric Investments Ltd's Dividend History

HK Electric Investments and HK Electric Investments Ltd has maintained a consistent dividend payment record since 2020. Dividends are currently distributed on a bi-annual basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.

HK Electric Investments and HK Electric Investments Ltd's Dividend Analysis
HK Electric Investments and HK Electric Investments Ltd's Dividend Analysis

Breaking Down HK Electric Investments and HK Electric Investments Ltd's Dividend Yield and Growth

As of today, HK Electric Investments and HK Electric Investments Ltd currently has a 12-month trailing dividend yield of 6.59% and a 12-month forward dividend yield of 6.60%. This suggests an expectation of increased dividend payments over the next 12 months.

Over the past three years, HK Electric Investments and HK Electric Investments Ltd's annual dividend growth rate was -3.90%. Extended to a five-year horizon, this rate decreased to -5.30% per year. Based on HK Electric Investments and HK Electric Investments Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of HK Electric Investments and HK Electric Investments Ltd stock as of today is approximately 5.02%.

HK Electric Investments and HK Electric Investments Ltd's Dividend Analysis
HK Electric Investments and HK Electric Investments 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, HK Electric Investments and HK Electric Investments Ltd's dividend payout ratio is 0.95, which may suggest that the company's dividend may not be sustainable.

HK Electric Investments and HK Electric Investments Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks HK Electric Investments and HK Electric Investments Ltd's profitability 6 out of 10 as of 2023-12-31, suggesting fair profitability. The company has reported net profit in 9 years out of the past 10 years.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. HK Electric Investments and HK Electric Investments Ltd's growth rank of 6 out of 10 suggests that the company has a fair growth outlook. Revenue is the lifeblood of any company, and HK Electric Investments and HK Electric Investments Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. HK Electric Investments and HK Electric Investments Ltd's revenue has increased by approximately 0.20% per year on average, a rate that underperforms approximately 82.86% 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, HK Electric Investments and HK Electric Investments Ltd's earnings increased by approximately 3.60% per year on average, a rate that underperforms approximately 54.25% of global competitors.

Lastly, the company's 5-year EBITDA growth rate of -2.80%, which underperforms approximately 74.08% of global competitors, adds another dimension to the analysis of the company's growth prospects.

Conclusion: Weighing HK Electric Investments and HK Electric Investments Ltd's Dividend Prospects

In conclusion, while HK Electric Investments and HK Electric Investments Ltd presents a high dividend yield, the negative dividend growth rates and the high payout ratio may raise concerns about the sustainability of its dividend payments. The company's fair profitability and growth metrics provide some reassurance, but the underperformance in revenue and earnings growth compared to peers suggests that investors should keep a close watch on the company's financial health. Value investors considering HK Electric Investments and HK Electric Investments Ltd for its dividend returns should also factor in these qualitative and quantitative aspects to make informed investment decisions. Will HK Electric Investments and HK Electric Investments Ltd's dividends continue to be a reliable source of income for investors? Only time will tell, but careful analysis and monitoring will be key.

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.