2 Rock-Solid Hong Kong Dividend Stocks

Dividend Investing

Author: Tim Phillips

May 5, 2021

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For investors, it might be a lesser known fact but Hong Kong stocks actually pay out dividends that are tax free. That’s similar to Singapore, where dividends are also not taxed for investors.

So, as economies face the prospect of another wave of Covid-19 cases, we should perhaps be looking to companies that can provide stable income no matter what the external business environment is like.

Here are two dividend stocks listed in Hong Kong that I think will still hold up no matter what happens with Covid-19 or a global economic recovery.

1. HKT Trust

With any investment during uncertainty, you want to own a stock that provides an essential service. For that, in Hong Kong, look no further than HKT Trust and HKT Ltd (SEHK: 6823).

The company operates the mobile telco brands 1010 and csl in Hong Kong and also provides home broadband services to the city’s residents.

The firm’s business has remained stable despite external headwinds such as the Covid-19 pandemic and also the Hong Kong protests in 2019.

For the full-year 2020 HKT Trust saw revenue that was pretty much flat year-on-year at US$3.81 billion. Meanwhile, its EBITDA was down 2% year-on-year to US$1.6 billion.

Like all telcos, its roaming revenues have been hit by a standstill in global travel. However, its customer count was still up in 2020 as customers upgraded broadband and mobile services.

HKT Trust is also planning to play a key role in the Smart City Infrastructure and Smart Mobility plans that the Hong Kong government has in place for the city.

Meanwhile, the uptake of 5G services is lifting its revenues are more customers subscribe to the plan. For the whole of 2020, HKT Trust paid out a dividend per share (DPS) of 71.01 HK cents.

At the time of writing, HKT Trust’s shares trade at HK$11.42 a piece, offering investors a juicy 6.2% dividend yield.

2. Guangdong Investment

Guangdong Investment Ltd (SEHK: 270) is a water utilities operator and provides the majority of Hong Kong’s water. It’s also involved in sewage treatment, water distribution and property as well as department stores.

Thankfully for investors, the water resources part of its business makes up the bulk of revenue and operating profit.

For the full-year 2020, the company saw 55% of its operating profit come from its water resources division. What’s more, its dividend growth rate has been phenomenal.

Over the nine years from 2011-2020, the company saw its DPS grow at a compound annual growth rate (CAGR) of 14.1%, all while maintaining a very manageable dividend payout ratio (see below).

Guangdong Investment dividend

Source: Guangdong Investment full-year 2020 earnings presentation

Although the growth in DPS has slowed recently, the company has more urban water supply projects in development that should support its growth going forward.

Currently, Guangdong Investment’s shares trade at HK$11.90, offering investors a 4.9% dividend yield based on its 2020 DPS of 58.9 HK cents.

Paying out no matter what

If you’re a conservative investor and want the reliability of income streams then HKT Trust and Guangdong Investment could be options to add to your portfolio.

The essential service they provide, in both telecoms services and water supply, mean that their cash flows should be able to support their dividends now and into the future.

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.