The Motley Fool

Like Dividends? Why Hongkong Land Offers Both Yield and Value

It might not be widely-known by investors but a fair number of Hong Kong-based firms are listed in Singapore. This includes one solid blue-chip share that many of us will be familiar with – Hongkong Land Holdings Limited (SGX:H78).

For investors who are seeking out both a reliable dividend and a cheap stock (amid relatively frothy valuations and markets globally), then you can’t go far wrong with this property giant that has great business fundamentals and is selling at a knock-down price.

Owns strong assets

Hongkong Land is a property investment, management, and development group with assets in countries such as Hong Kong, Singapore, and China. The company has two business segments: investment properties and development properties.

For example, in Hong Kong, the property outfit owns assets like Exchange Square, which is home to many leading international investment banks and financial institutions. Hong Kong’s stock market operator is also housed in Exchange Square. Chater House, Jardine House, and Prince’s Building, all of which are located in Central, are some of its other properties. In all, Hongkong Land’s Central Hong Kong portfolio represents around 450,000 square metres of prime property.

In Singapore, Hongkong Land has stakes in crucial landmarks such as Marina Bay Financial Centre, One Raffles Quay, and One Raffles Link.

Reputable track record

Hongkong Land has a strong long-term track record. Its investment property portfolio has grown from US$23.7 billion in 2014 to US$33.7 billion in 2018. Along with that, the net asset value per share rose from US$11.75 to US$16.43. Meanwhile, its underlying profit attributable to shareholders has climbed from US$980 million in 2014 to US$1.0 billion in 2018.

The following chart shows the net asset value per share growth in the past five years:

HK Land NAV growth 2014-2018

Source: Hongkong Land 2018 annual report

Valuation and dividend yield

Hongkong Land does not have a fixed dividend policy, but it aims to maintain its dividend per share through up-and-down cycles and steadily increase it over time off the back of higher earnings. The trend is evident from the chart below:

HK Land dividend growth from 2014-2018

Source: Hongkong Land 2018 annual report

From 2014 to 2016, Hongkong Land’s underlying earnings fell, but dividends were maintained at US 19 cents. In 2017 and 2018, underlying earnings grew, and that gave rise to dividends increasing year-on-year by 5% and 10%, respectively.

At its current share price of US$6.10 (at the time of writing), Hongkong Land has a stonkingly cheap price-to-book value of just 0.37 and a dividend yield of 3.6%, which is above Hong Kong’s projected long-term average inflation rate of 2.8%. What’s more, it also easily beats income favourite Link REIT‘s (SEHK:823) current distribution yield of 3.0%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Sudhan P owns shares in Hongkong Land Holdings Limited.