The Dividend Trap: Why HICL Infrastructure's High Yield Could Backfire

Investors chasing high yields often overlook the red flags hidden behind seductive dividends. Today, we’re sounding the alarm on HICL Infrastructure PLC (HICL.F), a company offering a 7.2% dividend yield that looks too good to be true—and for good reason. Let’s dissect why this “income machine” is actually a looming disaster in disguise.

1. The Paycheck Problem: Dividends Exceed Profits by 162%—And It’s Getting Worse

The math here is terrifying. In 2023, HICL paid out 162% of its profits as dividends—a payout ratio so high it’s unsustainable by definition. But here’s the kicker: Analysts project this ratio to surge to 183% by 2025.

Why? Because the company’s earnings per share (EPS) have declined by 20% annually over the past five years, while dividends remain stubbornly flat. This is like a company paying its workers double the revenue it brings in—eventually, the bills catch up.

2. The Earnings Death Spiral: A 20% Annual Drop Isn’t a Trend, It’s a Disaster

HICL’s earnings are in free fall. A 20% annual decline over five years means the company’s profit base is shrinking rapidly. For context, if this trend continues, EPS could halve by .

The dividend is being propped up by a dividend cover of just 1.7x, meaning earnings are only 1.7 times the payout. When this drops below 1.0, dividends will exceed profits outright—a guaranteed cut is coming.

3. Growth? What Growth? 1.3% Annual Dividend Growth Isn’t Growth—It’s Stagnation

While HICL’s yield dazzles at 7.2%, the compound annual growth rate (CAGR) of its dividend is a pitiful 1.3% over the past decade. That’s barely keeping up with inflation. Compare this to utilities peers averaging 3-5% growth, and you see the problem: This dividend isn’t growing—it’s clinging to life support.

4. Warning Signs Flashing Red: Two Strikes and You’re Out

The writing is on the wall:
- Strike 1: The NAV discount (the gap between the company’s assets and its stock price) is a staggering 30%. This suggests the market doesn’t trust HICL’s valuation.
- Strike 2: The dividend payout ratio is set to hit 183% by 2025, a level that would require miracles in earnings growth to sustain.

Even the company’s buyback program (已完成 £37m of £50m) isn’t enough to offset these structural issues. And let’s not forget: HICL has zero history of consecutive annual dividend increases. Stability? More like stagnation.

The Bottom Line: Run, Don’t Walk, Away from This Trap

The allure of a 7.2% yield is undeniable. But when a company’s dividend is built on shrinking profits, a collapsing EPS, and a payout ratio heading toward 183%, this isn’t income investing—it’s gambling.

Avoid HICL Infrastructure unless you’re betting on a miracle turnaround that hasn’t materialized in years. Investors chasing yield here may end up with no income and a sinking stock price.

Final Verdict: Avoid HICL.F. The dividend is a house of cards—and the winds of change are already blowing.

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The opinions expressed here are for educational purposes only and should not be taken as investment advice.