Minsheng Education Group (HKG:1569) Will Pay A Larger Dividend Than Last Year At HK$0.053

Minsheng Education Group Company Limited's (HKG:1569) dividend will be increasing to HK$0.053 on 22nd of August. This makes the dividend yield 8.2%, which is above the industry average.

Check out our latest analysis for Minsheng Education Group

Minsheng Education Group's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Minsheng Education Group was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS is forecast to expand by 24.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

Minsheng Education Group's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2020, the dividend has gone from CN¥0.026 to CN¥0.045. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see Minsheng Education Group has been growing its earnings per share at 11% a 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.

Our Thoughts On Minsheng Education Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Minsheng Education Group will make a great income stock. While Minsheng Education Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Minsheng Education Group that investors should know about before committing capital to this stock. Is Minsheng Education Group 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.