Esther Ang asked 5 months ago
Hi Rusmin,
I've been analysing CKI. While it has a strong track record of increasing dividends, the dividend payout ratio has also been increasing (though still less than 100%). Is this a cause for concern, particularly when FCF trend seems volatile? Also, there doesn't seem to be strong growth catalysts for CKI. In addition, due to the nature of its business, I forsee ESG compliance and it's associated costs will increase (significantly?) for CKI. Other risks I see are Brexit impact and FX risk. Would appreciate your thoughts on CKI, whether it is still a good dividend stock and what would be a safe entry price. It seems to be undervalued now.
For infrastructure dividend stocks such as CKI, what would be the main things to look out for when evaluating the business?
Thank you!
Victor Chng Staff answered 5 months ago
Hi Esther,
1. Overall, the payout ratio is lowering. Analysing CKI's FCF is slightly complicated as some assets own less than 50%. To get a clearer view of the cash flow, you must include the dividend they received from the Associate and Joint venture.
2. The ESG cost is still manageable.
3. They had been constantly hedging their currency position. FX depreciation also contributes to the increase in the payout ratio.
4. I think 6% yield is a good buffer for infrastructure assets.
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