ManpowerGroup Greater China's (HKG:2180) Shareholders Will Receive A Bigger Dividend Than Last Year

ManpowerGroup Greater China Limited (HKG:2180) will increase its dividend from last year's comparable payment on the 17th of July to CN¥0.31. This takes the dividend yield to 6.2%, which shareholders will be pleased with.

See our latest analysis for ManpowerGroup Greater China

ManpowerGroup Greater China's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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.

EPS is set to fall by 0.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 64%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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. Since 2020, the annual payment back then was CN¥0.224, compared to the most recent full-year payment of CN¥0.28. This means that it has been growing its distributions at 5.8% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

ManpowerGroup Greater China May Find It Hard To Grow The Dividend

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. However, ManpowerGroup Greater China's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ManpowerGroup Greater China will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think ManpowerGroup Greater China is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.