Miramar Hotel and Investment Company's (HKG:71) Dividend Will Be Increased To HK$0.21

Miramar Hotel and Investment Company, Limited (HKG:71) will increase its dividend from last year's comparable payment on the 12th of October to HK$0.21. This will take the dividend yield to an attractive 3.6%, providing a nice boost to shareholder returns.

See our latest analysis for Miramar Hotel and Investment Company

Miramar Hotel and Investment Company Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Miramar Hotel and Investment Company's dividend made up quite a large proportion of earnings but only 62% 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, EPS could fall by 26.1% 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 114%, 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

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. The dividend has gone from an annual total of HK$0.38 in 2012 to the most recent total annual payment of HK$0.47. This works out to be a compound annual growth rate (CAGR) of approximately 2.1% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Miramar Hotel and Investment Company's EPS has fallen by approximately 26% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Miramar Hotel and Investment Company's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Miramar Hotel and Investment Company's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Miramar Hotel and Investment Company is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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. 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.