Is My Humble House Hospitality Management Consulting Co., Ltd. (TPE:2739) A Strong Dividend Stock?

Today we'll take a closer look at My Humble House Hospitality Management Consulting Co., Ltd. (TPE:2739) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

In this case, My Humble House Hospitality Management Consulting likely looks attractive to dividend investors, given its 4.0% dividend yield and six-year payment history. It sure looks interesting on these metrics - but there's always more to the story. Some simple research can reduce the risk of buying My Humble House Hospitality Management Consulting for its dividend - read on to learn more.

Click the interactive chart for our full dividend analysis

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. While My Humble House Hospitality Management Consulting pays a dividend, it reported a loss over the last year. When a company recently reported a loss, we should investigate if its cash flows covered the dividend.

My Humble House Hospitality Management Consulting's cash payout ratio last year was 16%. Cash flows are typically lumpy, but this looks like an appropriately conservative payout.

With a strong net cash balance, My Humble House Hospitality Management Consulting investors may not have much to worry about in the near term from a dividend perspective.

Consider getting our latest analysis on My Humble House Hospitality Management Consulting's financial position here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Looking at the data, we can see that My Humble House Hospitality Management Consulting has been paying a dividend for the past six years. It's good to see that My Humble House Hospitality Management Consulting has been paying a dividend for a number of years. However, the dividend has been cut at least once in the past, and we're concerned that what has been cut once, could be cut again. During the past six-year period, the first annual payment was NT$2.2 in 2014, compared to NT$1.0 last year. Dividend payments have fallen sharply, down 55% over that time.

We struggle to make a case for buying My Humble House Hospitality Management Consulting for its dividend, given that payments have shrunk over the past six years.

Dividend Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. My Humble House Hospitality Management Consulting's earnings per share have shrunk at 49% a year over the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and My Humble House Hospitality Management Consulting's earnings per share, which support the dividend, have been anything but stable.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. We're not keen on the fact that My Humble House Hospitality Management Consulting paid dividends despite reporting a loss over the past year, although fortunately its dividend was covered by cash flow. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. Overall, My Humble House Hospitality Management Consulting falls short in several key areas here. Unless the investor has strong grounds for an alternative conclusion, we find it hard to get interested in a dividend stock with these characteristics.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come accross 3 warning signs for My Humble House Hospitality Management Consulting you should be aware of, and 1 of them is significant.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

If you’re looking to trade My Humble House Hospitality Management Consulting, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.