Mainland Headwear Holdings (HKG:1100) Is Increasing Its Dividend To HK$0.06

May 05, 2022
  •  Updated
May 28, 2022
Source: Shutterstock

Mainland Headwear Holdings Limited (HKG:1100) will increase its dividend on the 24th of June to HK$0.06. This makes the dividend yield 4.7%, which is above the industry average.

See our latest analysis for Mainland Headwear Holdings

Mainland Headwear Holdings' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Mainland Headwear Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 12.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

SEHK:1100 Historic Dividend May 5th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was HK$0.03 in 2012, and the most recent fiscal year payment was HK$0.07. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Mainland Headwear Holdings has been growing its earnings per share at 12% a year over the past five years. Mainland Headwear Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Mainland Headwear Holdings Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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About SEHK:1100

Mainland Headwear Holdings

Mainland Headwear Holdings Limited, an investment holding company, designs, manufactures, trades in, and distributes casual headwear products in the United States, Europe, the People’s Republic of China, Hong Kong, and internationally.

Excellent balance sheet with solid track record and pays a dividend.