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

Maike Tube Industry Holdings Limited's (HKG:1553) dividend is being reduced to HK$0.10 on the 6th of July. This means the annual payment is 6.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Maike Tube Industry Holdings

Maike Tube Industry Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Maike Tube Industry Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 35.4% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Maike Tube Industry Holdings Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. 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. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Maike Tube Industry Holdings' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Maike Tube Industry Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Maike Tube Industry Holdings (1 is potentially serious!) that you should be aware of before investing. Is Maike Tube Industry Holdings 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.