Miramar Hotel and Investment Company (HKG:71) Is Paying Out Less In Dividends Than Last Year

Miramar Hotel and Investment Company, Limited's (HKG:71) dividend is being reduced to HK$0.26 on the 8th of July. The yield is still above the industry average at 3.1%.

Check out our latest analysis for Miramar Hotel and Investment Company

Miramar Hotel and Investment Company Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Miramar Hotel and Investment Company's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Looking forward, EPS could fall by 26.4% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 129%, which could put the dividend in jeopardy if the company's earnings don't improve.

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 HK$0.38 in 2012 to the most recent annual payment of HK$0.46. This works out to be a compound annual growth rate (CAGR) of approximately 1.9% a year over that time. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Earnings per share has been sinking by 26% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Miramar Hotel and Investment Company's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Miramar Hotel and Investment Company you should be aware of, and 1 of them is concerning. 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.