Maike Tube Industry Holdings (HKG:1553) Has Announced That Its Dividend Will Be Reduced To HK$0.10

Maike Tube Industry Holdings Limited (HKG:1553) has announced it will be reducing its dividend payable on the 6th of July to HK$0.10. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Maike Tube Industry Holdings

Maike Tube Industry Holdings' Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Maike Tube Industry Holdings was paying a whopping 153% as a dividend, but this only made up 30% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 35.4% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Maike Tube Industry Holdings Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Maike Tube Industry Holdings has been growing its earnings per share at 35% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Maike Tube Industry Holdings is earning enough to cover the payments, the cash flows are lacking. We don't think Maike Tube Industry Holdings is a great stock to add to your portfolio if income is your focus.

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. For instance, we've picked out 3 warning signs for Maike Tube Industry Holdings that investors should take into consideration. 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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