Grand Ming Group Holdings (HKG:1271) Has Announced A Dividend Of HK$0.04

Grand Ming Group Holdings Limited (HKG:1271) has announced that it will pay a dividend of HK$0.04 per share on the 2nd of September. The dividend yield is 3.6% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Grand Ming Group Holdings

Grand Ming Group Holdings Doesn't Earn Enough To Cover Its Payments

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, the company was paying out 647% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 30%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

If the company can't turn things around, EPS could fall by 38.7% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 4,267%, which is definitely a bit high to be sustainable going forward.

Grand Ming Group Holdings' Dividend Has Lacked Consistency

Looking back, Grand Ming Group Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2013, the first annual payment was HK$0.02, compared to the most recent full-year payment of HK$0.28. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. Grand Ming Group Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Grand Ming Group Holdings' EPS has declined at around 39% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Grand Ming Group Holdings' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Grand Ming Group Holdings has 5 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Grand Ming Group Holdings 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.