Mainland Headwear Holdings (HKG:1100) Is Paying Out A Dividend Of HK$0.06

Mainland Headwear Holdings Limited (HKG:1100) will pay a dividend of HK$0.06 on the 21st of June. This makes the dividend yield 6.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Mainland Headwear Holdings

Mainland Headwear Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Mainland Headwear Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 9.0% 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 34% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was HK$0.019 in 2014, and the most recent fiscal year payment was HK$0.09. This means that it has been growing its distributions at 17% per annum over that time. Mainland Headwear Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Mainland Headwear Holdings' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mainland Headwear Holdings has impressed us by growing EPS at 9.0% 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

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 3 warning signs for Mainland Headwear Holdings that investors should know about before committing capital to this stock. 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.