ManpowerGroup Greater China (HKG:2180) Is Increasing Its Dividend To CN¥0.31

The board of ManpowerGroup Greater China Limited (HKG:2180) has announced that it will be paying its dividend of CN¥0.31 on the 17th of July, an increased payment from last year's comparable dividend. This takes the dividend yield to 6.1%, which shareholders will be pleased with.

See our latest analysis for ManpowerGroup Greater China

ManpowerGroup Greater China's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, ManpowerGroup Greater China 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 earning enough to make the dividend feasible, but the cash payout ratio of 79% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, EPS could fall by 0.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 64%, which we are pretty comfortable with and we think is feasible on an earnings basis.

ManpowerGroup Greater China's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 4 years was CN¥0.224 in 2020, and the most recent fiscal year payment was CN¥0.28. This means that it has been growing its distributions at 5.8% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. ManpowerGroup Greater China hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On ManpowerGroup Greater China's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments ManpowerGroup Greater China has been making. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for ManpowerGroup Greater China that investors need to be conscious of moving forward. Is ManpowerGroup Greater China 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.