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) will increase its dividend from last year's comparable payment on the 11th of July to HK$0.29. This will take the dividend yield to an attractive 4.2%, providing a nice boost to shareholder returns.

See our latest analysis for Miramar Hotel and Investment Company

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 72% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, could fall by 22.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 90%, which is definitely on the higher side.

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$0.39 in 2013 to the most recent total annual payment of HK$0.50. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. 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. 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, 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. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.