Million Hope Industries Holdings (HKG:1897) Has Announced That Its Dividend Will Be Reduced To HK$0.005

Million Hope Industries Holdings Limited (HKG:1897) has announced that on 13th of December, it will be paying a dividend ofHK$0.005, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 5.7%, which only provides a modest boost to overall returns.

Check out our latest analysis for Million Hope Industries Holdings

Million Hope Industries Holdings' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Million Hope Industries Holdings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 18.2% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 75%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Million Hope Industries Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the annual payment back then was HK$0.02, compared to the most recent full-year payment of HK$0.025. This means that it has been growing its distributions at 4.6% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 18% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Million Hope Industries Holdings (1 doesn't sit too well with us!) that you should be aware of before investing. Is Million Hope Industries 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.