Modern Dental Group (HKG:3600) Has Announced That Its Dividend Will Be Reduced To HK$0.037

Modern Dental Group Limited's (HKG:3600) dividend is being reduced from last year's payment covering the same period to HK$0.037 on the 11th of October. The yield is still above the industry average at 5.3%.

View our latest analysis for Modern Dental Group

Modern Dental Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Modern Dental Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 13%, which we would be comfortable to see continuing.

Modern Dental Group's Dividend Has Lacked Consistency

It's comforting to see that Modern Dental Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the dividend has gone from HK$0.042 total annually to HK$0.119. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Modern Dental Group has grown earnings per share at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Modern Dental Group Looks Like A Great Dividend Stock

Overall, we think that Modern Dental Group could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Modern Dental Group that investors should know about before committing capital to this stock. 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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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.