The board of Ming Fai International Holdings Limited (HKG:3828) has announced that it will pay a dividend of HK$0.03 per share on the 3rd of October. This will take the dividend yield to an attractive 9.0%, providing a nice boost to shareholder returns.
Check out our latest analysis for Ming Fai International Holdings
Ming Fai International Holdings' Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Ming Fai International Holdings was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS could expand by 5.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.
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$0.035, compared to the most recent full-year payment of HK$0.07. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year 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. Ming Fai International Holdings might have put its house in order since then, but we remain cautious.
Ming Fai International Holdings Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Ming Fai International Holdings has been growing its earnings per share at 5.2% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
Our Thoughts On Ming Fai International Holdings' Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Ming Fai International Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.