Midea Real Estate Holding (HKG:3990) Will Pay A Dividend Of HK$1.60

By
Simply Wall St
Published
May 27, 2021
SEHK:3990
Source: Shutterstock

Midea Real Estate Holding Limited (HKG:3990) will pay a dividend of HK$1.60 on the 29th of July. This means the annual payment is 8.4% of the current stock price, which is above the average for the industry.

View our latest analysis for Midea Real Estate Holding

Midea Real Estate Holding's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Midea Real Estate Holding is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 21.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
SEHK:3990 Historic Dividend May 28th 2021

Midea Real Estate Holding Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The first annual payment during the last 2 years was CN¥1.08 in 2019, and the most recent fiscal year payment was CN¥1.32. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Midea Real Estate Holding has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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. Midea Real Estate Holding has seen EPS rising for the last five years, at 46% per annum. 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.

Our Thoughts On Midea Real Estate Holding's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Midea Real Estate Holding is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Midea Real Estate Holding (1 makes us a bit uncomfortable!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.