Min Xin Holdings Limited's (HKG:222) dividend is being reduced from last year's payment covering the same period to HK$0.09 on the 12th of July. This means that the annual payment will be 3.9% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Min Xin Holdings
Min Xin Holdings Doesn't Earn Enough To Cover Its Payments
Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, Min Xin Holdings was paying out 136% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.
Looking forward, EPS could fall by 41.6% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 258%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was HK$0.05, compared to the most recent full-year payment of HK$0.09. This means that it has been growing its distributions at 6.1% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Min Xin Holdings might have put its house in order since then, but we remain cautious.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Min Xin Holdings' EPS has fallen by approximately 42% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
Min Xin Holdings' Dividend Doesn't Look Great
In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Min Xin Holdings (2 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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