The board of Ming Fai International Holdings Limited (HKG:3828) has announced that it will be increasing its dividend by 40% on the 6th of June to HK$0.07, up from last year's comparable payment of HK$0.05. This makes the dividend yield 8.2%, which is above the industry average.
Ming Fai International Holdings' Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Ming Fai International Holdings was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.
If the trend of the last few years continues, EPS will grow by 7.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Ming Fai International Holdings
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from HK$0.035 total annually to HK$0.08. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
Ming Fai International Holdings Could Grow Its Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Ming Fai International Holdings has seen EPS rising for the last five years, at 7.7% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Ming Fai International Holdings' prospects of growing its dividend payments in the future.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Ming Fai International Holdings will make a great income stock. While Ming Fai International Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Ming Fai International Holdings is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Ming Fai International Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.