understanding HKT - Dividend Machines by The Fifth Person

Q&A › Category: Dividend Stocks › understanding HKT

grinder asked 2 years ago

Hi Dividend Machine team,
I'm trying to understand HKT (6823 in HKEX) and checking if they're

paying out dividends in a consistent & manageable way and
capital returns exceed capital gains.

For 1, is it accurate to say for example in year 2022 they\'re distributing more dividends than they bring in profits (5.56B vs 4.92B), and in order to distribute the dividends they actually burned through some cash to make it happen (so cash positions lowered from 2.4B to 1.997B)?
For 2, I tried to collect the past few years from their AR, can I seek help in validating if I\'m looking at the right numbers (screenshot attached)?
Thank you very much!

Attachments

HKT_capital.jpg

1 Answers

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Rusmin Ang Staff answered 2 years ago

Hi Grinder, You are right to say that HKT's payout ratio has been at 100% or more but if we refer to their cashflow and free cashflow, they are actually paying within their means. Non cash items such as depreciation and amortisation often constitute the big item in the expense lines for telco companies and that's why they could afford to pay out more than its earnings. So in this case, I think their payout is still sustainable. If you prefer, you can calculate the payout ratio using this formula: DPS/FCF instead of DPS/EPS. Your work on Capital Returns/Raised is good. Keep it up!

grinder replied 2 years ago

Thanks for the quick response Rusmin! Another follow up question, for telcos, are there any generic rules around what % of depreciation and amortisation in terms of operating income are acceptable?

Rusmin Ang Staff replied 2 years ago

Honestly, I never look at it this way before. We usually focus on dividend sustainability for dividend stocks.

grinder replied 2 years ago

Got it, thank you Rusmin!