Kerry Properties Limited (HKG:683) has announced that it will pay a dividend of HK$0.95 per share on the 10th of June. This payment means that the dividend yield will be 7.3%, which is around the industry average.
Kerry Properties' Projected Earnings Seem Likely To Cover Future Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 42% which is fairly sustainable.
Check out our latest analysis for Kerry Properties
Kerry Properties 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$0.90 in 2015 to the most recent total annual payment of HK$1.35. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 35% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Kerry Properties' 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 Kerry Properties' payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Kerry Properties has 4 warning signs (and 2 which are concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.