Yahoo Finance It Might Not Be A Great Idea To Buy Hang Lung Properties Limited (HKG:101) For Its Next Dividend
Readers hoping to buy Hang Lung Properties Limited (HKG:101) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 5th of May will not receive the dividend, which will be paid on the 20th of May.
Hang Lung Properties's upcoming dividend is HK$0.59 a share, following on from the last 12 months, when the company distributed a total of HK$0.76 per share to shareholders. Looking at the last 12 months of distributions, Hang Lung Properties has a trailing yield of approximately 4.6% on its current stock price of HK$16.62. If you buy this business for its dividend, you should have an idea of whether Hang Lung Properties's dividend is reliable and sustainable. As a result, readers should always check whether Hang Lung Properties has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Hang Lung Properties
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hang Lung Properties paid out 55% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 63% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Hang Lung Properties's earnings per share have dropped 12% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past ten years, Hang Lung Properties has increased its dividend at approximately 1.4% a year on average.
To Sum It Up
From a dividend perspective, should investors buy or avoid Hang Lung Properties? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. It's not that we think Hang Lung Properties is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that in mind though, if the poor dividend characteristics of Hang Lung Properties don't faze you, it's worth being mindful of the risks involved with this business. To that end, you should learn about the 3 warning signs we've spotted with Hang Lung Properties (including 1 which is potentially serious).
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
