APT Satellite Holdings (HKG:1045) Is Reducing Its Dividend To HK$0.025

APT Satellite Holdings Limited's (HKG:1045) dividend is being reduced by 44% to HK$0.025 per share on 14th of October, in comparison to last year's comparable payment of HK$0.045. However, the dividend yield of 4.9% still remains in a typical range for the industry.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

APT Satellite Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, APT Satellite Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 2.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 51%, which is definitely feasible to continue.

View our latest analysis for APT Satellite Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was HK$0.08, compared to the most recent full-year payment of HK$0.11. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last five years, APT Satellite Holdings' earnings per share has shrunk at approximately 2.6% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On APT Satellite Holdings' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think APT Satellite Holdings is a great stock to add to your portfolio if income is your focus.

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, APT Satellite Holdings has 2 warning signs (and 1 which can't be ignored) 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.

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.