Stock Analysis

MECOM Power and Construction's (HKG:1183) Dividend Will Be Reduced To MOP0.015

SEHK:1183
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MECOM Power and Construction Limited (HKG:1183) has announced that on 6th of October, it will be paying a dividend ofMOP0.015, which a reduction from last year's comparable dividend. This means that the dividend yield is 2.2%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for MECOM Power and Construction

MECOM Power and Construction Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last dividend, MECOM Power and Construction is earning enough to cover the payment, but then it makes up 97% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Earnings per share could rise by 8.0% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 98%, which is a bit high and could start applying pressure to the balance sheet.

historic-dividend
SEHK:1183 Historic Dividend September 2nd 2022

MECOM Power and Construction's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2018, the annual payment back then was MOP0.0307, compared to the most recent full-year payment of MOP0.0453. This means that it has been growing its distributions at 10% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See MECOM Power and Construction's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. MECOM Power and Construction has impressed us by growing EPS at 8.0% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On MECOM Power and Construction's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think MECOM Power and Construction is a great stock to add to your portfolio if income is your focus.

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. Now, if you want to look closer, it would be worth checking out our free research on MECOM Power and Construction management tenure, salary, and performance. Is MECOM Power and Construction not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.