Miramar Hotel and Investment Company's (HKG:71) Shareholders Will Receive A Bigger Dividend Than Last Year

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$0.29. This makes the dividend yield 4.2%, which is above the industry average.

View our latest analysis for Miramar Hotel and Investment Company

Miramar Hotel and Investment Company's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 72% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 22.7% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 90% in the next 12 months which is on the higher end of the range we would say is sustainable.

Miramar Hotel and Investment Company Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from HK$0.38 total annually to HK$0.50. This implies that the company grew its distributions at a yearly rate of about 2.8% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Miramar Hotel and Investment Company's EPS has declined at around 23% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Miramar Hotel and Investment Company's Dividend

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. 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.

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. 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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