MGM China Holdings Limited (HKG:2282) Passed Our Checks, And It's About To Pay A HK$0.104 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see MGM China Holdings Limited (HKG:2282) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, MGM China Holdings investors that purchase the stock on or after the 8th of April will not receive the dividend, which will be paid on the 23rd of April.

The company's next dividend payment will be HK$0.104 per share, on the back of last year when the company paid a total of HK$0.24 to shareholders. Looking at the last 12 months of distributions, MGM China Holdings has a trailing yield of approximately 1.8% on its current stock price of HK$13.54. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether MGM China Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for MGM China Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. MGM China Holdings paid out a comfortable 35% of its profit last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, MGM China Holdings's earnings per share have been growing at 20% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. MGM China Holdings's dividend payments per share have declined at 17% per year on average over the past 10 years, which is uninspiring. MGM China Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is MGM China Holdings worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, MGM China Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while MGM China Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example - MGM China Holdings has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking 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.