A woman walks past an MTR sign in Hong Kong. Analysts cautioned that a huge dividend increase by the MTR may not be possible in the near term. Antony Dickson / AFP

Local sole railway operator MTR Corporation said Friday it might raise its dividend payment to shareholders if the company's profit growth can be maintained at a steady pace.

MTR Chairman Raymond Chien said this in response to shareholders' demand for higher dividends, at the annual general meeting.

Analysts cautioned that a huge dividend increase by the MTR may not be possible in the near term as the company needs capital for property development and overseas business expansion.

"We have already adopted a progressive approach to maintain constant dividend payment in the last few years as we have started a few large railway construction projects. If the company can sustain its reasonable profit growth in the future, then it is likely for us to enhance our dividend payment to shareholders," Chien said at the meeting.

"However, MTR needs capital to expand the local railway network in the next five years. So, the company needs to strike a balance between conserving capital for future business expansion and injecting capital as dividend payment," Chien added.

AMTD Financial Planning Securities Manager Kenny Tang seemed to concur.

"MTR's capability to raise future dividend payment may be limited because it has to conserve capital for its property development and overseas railway projects," Tang told China Daily.

"As the company cannot raise dividend payment significantly, we forecast the dividend yield of the MTR should not exceed 4 percent in the near future," he said.

MTR raised its full year dividend by 13.5 percent on yearly basis to HK$0.59 per share while announcing its 2010 annual result in March. However, its dividend payout ratio in 2010 - the percentage of the company earnings paid to shareholders as dividends - fell to 28 percent from 32 percent in 2008. MTR is not a high dividend yield stock: it hovers around 2.1 percent.

Property development is also a major business for MTR, which is one of the two main land-holders in Hong Kong apart from the government. The other is the Urban Renewal Authority.

Some shareholders at the Friday meeting suggested that MTR should spin off its property business segment in order to boost business focus.

"The management of MTR Corporation will consider the maximization of shareholders' interests as the highest principle in deciding whether to pursue a spin-off or not. The spin-off issue is not one the management can decide on its own," Chien said.

The developer's chief executive officer C.K. Chow said it would launch five residential projects for tendering in 2011, one each in Tai Wai, Tin Shui Wai, Nam Cheong and two in Tsuen Wan. The tendering bid price would not be lowered just for the sake of cooling down the buoyant market sentiment, Chow added.

MTR is starting various railway projects including the "Shatin to Central Express Rail Link". When the High Court in April rejected the environmental assessment report of the "Hong Kong-Zhuhai-Macao Bridge" put forward by the Transport and Housing Bureau, it had a knock-on effect on the new line's own environmental report.

"MTR will fine-tune the environmental assessment report so that the report can be made acceptable to the society. We are still optimistic that the 'Shatin to Central express rail link' can be finalized by 2020," Chien said.

China Daily

(HK Edition 05/07/2011 page2)