Miramar Hotel and Investment Company (HKG:71) Has Announced That It Will Be Increasing Its Dividend To HK$0.29

The board of Miramar Hotel and Investment Company, Limited (HKG:71) has announced that it will be paying its dividend of HK$0.29 on the 11th of July, an increased payment from last year's comparable dividend. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Miramar Hotel and Investment Company

Miramar Hotel and Investment Company's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Miramar Hotel and Investment Company was paying out 72% of earnings, but a comparatively small 69% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, could fall by 22.7% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 90%, meaning that most of the company's earnings is being paid out to shareholders.

Miramar Hotel and Investment Company Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of HK$0.38 in 2013 to the most recent total annual payment of HK$0.50. This implies that the company grew its distributions at a yearly rate of about 2.8% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Miramar Hotel and Investment Company's EPS has fallen by approximately 23% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Miramar Hotel and Investment Company that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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