Miramar Hotel and Investment Company (HKG:71) Is Increasing Its Dividend To HK$0.30

Miramar Hotel and Investment Company, Limited (HKG:71) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of July to HK$0.30. This will take the annual payment to 5.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Miramar Hotel and Investment Company

Miramar Hotel and Investment Company's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Miramar Hotel and Investment Company's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 9.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 42%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Miramar Hotel and Investment Company Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from HK$0.44 total annually to HK$0.53. This implies that the company grew its distributions at a yearly rate of about 1.9% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Miramar Hotel and Investment Company has seen earnings per share falling at 9.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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 instance, we've picked out 1 warning sign for Miramar Hotel and Investment Company that investors should take into consideration. Is Miramar Hotel and Investment Company 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.