Mainland Headwear Holdings' (HKG:1100) Dividend Will Be HK$0.03

Mainland Headwear Holdings Limited (HKG:1100) will pay a dividend of HK$0.03 on the 14th of October. Based on this payment, the dividend yield on the company's stock will be 3.5%, which is an attractive boost to shareholder returns.

See our latest analysis for Mainland Headwear Holdings

Mainland Headwear Holdings' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Mainland Headwear Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 14.4% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.0381 in 2012, and the most recent fiscal year payment was HK$0.0667. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Mainland Headwear Holdings has grown earnings per share at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Mainland Headwear Holdings' prospects of growing its dividend payments in the future.

We Really Like Mainland Headwear Holdings' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Mainland Headwear Holdings that investors need to be conscious of moving forward. Is Mainland Headwear 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.