Grand Ming Group Holdings' (HKG:1271) Dividend Is Being Reduced To HK$0.04

The board of Grand Ming Group Holdings Limited (HKG:1271) has announced it will be reducing its dividend by 33% from last year's payment of HK$0.06 on the 20th of December, with shareholders receiving HK$0.04. Despite the cut, the dividend yield of 6.6% will still be comparable to other companies in the industry.

Check out our latest analysis for Grand Ming Group Holdings

Grand Ming Group Holdings' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, Grand Ming Group Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 49.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was HK$0.0203 in 2013, and the most recent fiscal year payment was HK$0.26. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Grand Ming Group Holdings has impressed us by growing EPS at 49% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Grand Ming Group Holdings' Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Grand Ming Group Holdings has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Grand Ming Group Holdings that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.