Hang Lung Group Limited (HKG:10) will pay a dividend of HK$0.65 on the 16th of June. The dividend yield will be 8.5% based on this payment which is still above the industry average.
View our latest analysis for Hang Lung Group
Hang Lung Group's Future Dividends May Potentially Be At Risk
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Hang Lung Group's 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.
If the company can't turn things around, EPS could fall by 25.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 97%, which is definitely a bit high to be sustainable going forward.
Hang Lung Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of HK$0.80 in 2015 to the most recent total annual payment of HK$0.86. Dividend payments have grown at less than 1% a year over this period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Hang Lung Group's EPS has fallen by approximately 25% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Our Thoughts On Hang Lung Group's Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Hang Lung Group has 3 warning signs (and 1 which is potentially serious) we think you should know about. Is Hang Lung Group not quite the opportunity you were looking for? Why not check out our selection of top 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.