Man Wah Holdings' (HKG:1999) Dividend Is Being Reduced To HK$0.12

Man Wah Holdings Limited (HKG:1999) is reducing its dividend to HK$0.12 on the 23rd of Julywhich is 20% less than last year's comparable payment of HK$0.15. The dividend yield of 7.2% is still a nice boost to shareholder returns, despite the cut.

We've discovered 1 warning sign about Man Wah Holdings. View them for free.

Man Wah Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Man Wah 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.

Looking forward, earnings per share is forecast to rise by 35.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

See our latest analysis for Man Wah Holdings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was HK$0.125, compared to the most recent full-year payment of HK$0.30. This implies that the company grew its distributions at a yearly rate of about 9.1% 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's Growth Prospects Are Limited

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. Earnings per share has been crawling upwards at 4.4% per year. While EPS growth is quite low, Man Wah Holdings has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, we think that Man Wah Holdings could make a reasonable income stock, even though it did cut the dividend this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 Man Wah Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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