Delving into Hang Seng Bank Ltd's Dividend Performance and Sustainability
Hang Seng Bank Ltd(HSNGY, Financial) recently announced a dividend of $0.14 per share, payable on 2023-11-20, with the ex-dividend date set for 2023-10-17. As investors anticipate this forthcoming payment, it's crucial to examine the company's dividend history, yield, and growth rates. Utilizing data from GuruFocus, we delve into Hang Seng Bank Ltd's dividend performance and assess its sustainability.
What Does Hang Seng Bank Ltd Do?
Established in 1933, Hang Seng Bank is a Hong Kong-based financial institution with a rich history. The bank operates three main segments: retail banking and wealth management, commercial banking, and global banking and markets. Hang Seng Bank Ltd primarily generates its profits in Hong Kong and mainland China. Since 1965, HSBC has been its majority shareholder, owning a controlling 62% stake.
A Glimpse at Hang Seng Bank Ltd's Dividend History
Since 2010, Hang Seng Bank Ltd has demonstrated a consistent dividend payment record, currently distributing dividends on a quarterly basis. The chart below illustrates the 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 boasts a 12-month trailing dividend yield of 5.05% and a 12-month forward dividend yield of 5.47%. This indicates an anticipated increase in dividend payments over the next 12 months.
Over the past three years, Hang Seng Bank Ltd's annual dividend growth rate was -20.60%. This rate increased to -8.30% per year over a five-year horizon. Over the past decade, Hang Seng Bank Ltd's annual dividends per share growth rate stands at 0.50%.
Considering 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 3.27%.
The Sustainability Question: Payout Ratio and Profitability
The sustainability of the dividend is determined by evaluating the company's payout ratio. The dividend payout ratio reveals the portion of earnings the company distributes as dividends. A lower ratio implies that the company retains a significant part of its earnings, ensuring funds for future growth and unexpected downturns. As of 2023-06-30, Hang Seng Bank Ltd's dividend payout ratio is 0.62.
Hang Seng Bank Ltd's profitability rank of 4 out of 10 as of 2023-06-30, suggests the dividend may not be sustainable. However, the company has reported positive net income each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
A company must have robust growth metrics to ensure the sustainability of dividends. Hang Seng Bank Ltd's growth rank of 4 out of 10 suggests poor growth prospects, implying the dividend may not be sustainable.
Revenue is vital for any company, and Hang Seng Bank Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. However, Hang Seng Bank Ltd's revenue has increased by approximately -5.60% per year on average, a rate that underperforms approximately 92.18% 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 -27.10% per year on average, a rate that underperforms approximately 96.95% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -15.40%, underperforms approximately 96.7% of global competitors.
Conclusion
While Hang Seng Bank Ltd has demonstrated a consistent dividend payment history, the sustainability of its dividends is questionable. The bank's payout ratio, profitability rank, and growth metrics suggest potential challenges in maintaining its dividend payments. Investors should monitor these factors closely and make informed decisions. For high-dividend yield stocks, consider using the GuruFocus High Dividend Yield Screener.
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.
