Mainland Headwear Holdings (HKG:1100) Has Announced A Dividend Of HK$0.03

The board of Mainland Headwear Holdings Limited (HKG:1100) has announced that it will pay a dividend on the 10th of October, with investors receiving HK$0.03 per share. The dividend yield will be 4.9% based on this payment which is still above the industry average.

View our latest analysis for Mainland Headwear Holdings

Mainland Headwear Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Mainland Headwear Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 17.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from HK$0.0381 total annually to HK$0.09. This implies that the company grew its distributions at a yearly rate of about 9.0% 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 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 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Mainland Headwear Holdings Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Mainland Headwear Holdings might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Mainland Headwear Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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