ManpowerGroup Greater China (HKG:2180) Is Paying Out A Larger Dividend Than Last Year

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 5.8%, which shareholders will be pleased with.

Check out our latest analysis for ManpowerGroup Greater China

ManpowerGroup Greater China's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments 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.

Unless the company can turn things around, EPS could fall by 0.8% over the next year. 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

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2020, the annual payment back then was CN¥0.224, compared to the most recent full-year payment of CN¥0.28. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

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. Unfortunately, ManpowerGroup Greater China's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

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. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, ManpowerGroup Greater China has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.

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