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If you are interested in cashing in on Hang Lung Properties Limited's (HKG:101) upcoming dividend of HK$0.58 per share, you only have 3 days left to buy the shares before its ex-dividend date, 03 May 2019, in time for dividends payable on the 21 May 2019. Is this future income a persuasive enough catalyst for investors to think about Hang Lung Properties as an investment today? Below, I'm going to look at the latest data and analyze the stock and its dividend property in further detail.
View our latest analysis for Hang Lung Properties
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is their annual yield among the top 25% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Will it have the ability to keep paying its dividends going forward?
How well does Hang Lung Properties fit our criteria?
The company currently pays out 42% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 76% which, assuming the share price stays the same, leads to a dividend yield of 4.2%. However, EPS is forecasted to fall to HK$1.03 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Although 101's per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Hang Lung Properties produces a yield of 4.1%, which is high for Real Estate stocks but still below the market's top dividend payers.
Next Steps:
Keeping in mind the dividend characteristics above, Hang Lung Properties is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental aspects you should further research: