Hongkong Land Holdings Limited (SGX:H78) has announced that it will pay a dividend of $0.06 per share on the 16th of October. The dividend yield will be 6.9% based on this payment which is still above the industry average.

Check out our latest analysis for Hongkong Land Holdings

Hongkong Land Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Hongkong Land Holdings isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, so there isn't too much pressure on the dividend.

Hongkong Land Holdings 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 $0.18 in 2014 to the most recent total annual payment of $0.22. This works out to be a compound annual growth rate (CAGR) of approximately 2.0% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Hongkong Land Holdings hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hongkong Land Holdings' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Hongkong Land Holdings that investors should know about before committing capital to this stock. Is Hongkong Land Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.