Hang Seng Bank Ltd's Dividend Analysis
Assessing the Sustainability of Hang Seng Bank Ltd's Dividend
Hang Seng Bank Ltd (HSNGY) recently announced a dividend of $0.41 per share, payable on 2024-04-01, with the ex-dividend date set for 2024-03-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Hang Seng Bank Ltd's dividend performance and assess its sustainability.
What Does Hang Seng Bank Ltd Do?
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Hang Seng Bank is a Hong Kong-based financial institution. Founded in 1933, the bank has a long history in Hong Kong and operates three main segments, retail banking and wealth management, commercial banking, and global banking and markets. The majority of the group's profit is generated in Hong Kong and mainland China. HSBC has been its majority shareholder since 1965, with a controlling 62% stake.
A Glimpse at Hang Seng Bank Ltd's Dividend History
Hang Seng Bank Ltd has maintained a consistent dividend payment record since 2010. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Hang Seng Bank Ltd's Dividend Yield and Growth
As of today, Hang Seng Bank Ltd currently has a 12-month trailing dividend yield of 5.90% and a 12-month forward dividend yield of 7.25%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Hang Seng Bank Ltd's annual dividend growth rate was -7.50%. Extended to a five-year horizon, this rate decreased to -9.70% per year. And over the past decade, Hang Seng Bank Ltd's annual dividends per share growth rate stands at -0.50%.
Based on Hang Seng Bank Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Hang Seng Bank Ltd stock as of today is approximately 3.54%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Hang Seng Bank Ltd's dividend payout ratio is 0.59.
Hang Seng Bank Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Hang Seng Bank Ltd's profitability 4 out of 10 as of 2023-12-31, suggesting the dividend may not be sustainable. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Hang Seng Bank Ltd's growth rank of 4 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Revenue is the lifeblood of any company, and Hang Seng Bank Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Hang Seng Bank Ltd's revenue has increased by approximately -8.90% per year on average, a rate that underperforms than approximately 94.44% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Hang Seng Bank Ltd's earnings increased by approximately 2.40% per year on average, a rate that underperforms than approximately 74.88% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -12.50%, which underperforms than approximately 95.45% of global competitors.
Next Steps
Considering Hang Seng Bank Ltd's dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors should approach with caution. The company's historical commitment to dividends is commendable, yet the negative growth rates and a modest profitability rank raise questions about future sustainability. Value investors may want to closely monitor Hang Seng Bank Ltd's financial health and strategic initiatives going forward. Will Hang Seng Bank Ltd be able to reverse the trend and offer value investors a sustainable income stream? GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener to find potentially more robust dividend opportunities.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
