Here's What We Like About Mainland Headwear Holdings' (HKG:1100) Upcoming Dividend
Mainland Headwear Holdings Limited (HKG:1100) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Mainland Headwear Holdings' shares on or after the 28th of May, you won't be eligible to receive the dividend, when it is paid on the 18th of June.
The company's upcoming dividend is HK$0.06 a share, following on from the last 12 months, when the company distributed a total of HK$0.09 per share to shareholders. Based on the last year's worth of payments, Mainland Headwear Holdings has a trailing yield of 5.7% on the current stock price of HK$1.57. If you buy this business for its dividend, you should have an idea of whether Mainland Headwear Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Mainland Headwear Holdings has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Mainland Headwear Holdings's payout ratio is modest, at just 33% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
See our latest analysis for Mainland Headwear Holdings
Click here to see how much of its profit Mainland Headwear Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Mainland Headwear Holdings has grown its earnings rapidly, up 21% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Mainland Headwear Holdings has increased its dividend at approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Should investors buy Mainland Headwear Holdings for the upcoming dividend? Mainland Headwear Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Mainland Headwear Holdings, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Mainland Headwear Holdings is facing. For instance, we've identified 2 warning signs for Mainland Headwear Holdings (1 doesn't sit too well with us) you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.