Ming Fai International Holdings' (HKG:3828) Upcoming Dividend Will Be Larger Than Last Year's

Ming Fai International Holdings Limited (HKG:3828) will increase its dividend from last year's comparable payment on the 7th of June to HK$0.05. This makes the dividend yield 9.6%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Ming Fai International Holdings' stock price has increased by 30% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Ming Fai International Holdings

Ming Fai International Holdings' 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. Based on the last payment, Ming Fai International Holdings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 0.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was HK$0.035, compared to the most recent full-year payment of HK$0.07. This means that it has been growing its distributions at 7.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ming Fai International Holdings might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Ming Fai International Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 0.5% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Ming Fai International Holdings' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Ming Fai International Holdings (1 is a bit unpleasant!) that you should be aware of before investing. Is Ming Fai International Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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