Mainland Headwear Holdings Limited (HKG:1100) the stock is set to trade ex-dividend in 4 days. Generally, the ex-dividend date is one business day before the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not be on the company’s books as of the record date. In other words, investors can buy shares of Mainland Headwear Holdings before May 30 in order to be eligible for the dividend, which will be paid on June 24.
The company’s next dividend payment will be HK$0.06 per share. Last year, in total, the company distributed HK$0.07 to shareholders. Last year’s total dividend payout shows that Mainland Headwear Holdings has a 3.6% yield on the current share price of HK$1.95. Dividends are an important source of income for many shareholders, but the health of the company is essential to sustaining those dividends. We therefore need to consider whether Mainland Headwear Holdings can afford its dividend, and whether the dividend could increase.
Check out our latest analysis for Mainland Headwear Holdings
Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. Mainland Headwear Holdings only paid out 22% of its earnings last year, which we believe is relatively low and leaves plenty of room for unforeseen circumstances. A useful secondary check may be to assess whether Mainland Headwear Holdings has generated enough free cash flow to pay its dividend. Fortunately, its dividend payouts only accounted for 37% of the free cash flow it generated, which is a comfortable payout ratio.
It is positive to see Mainland Headwear Holdings’ dividend being covered by both earnings and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio generally suggests greater safety margin before the dividend is reduced.
Click here to see how much profit Mainland Headwear Holdings has paid out over the past 12 months.
Have earnings and dividends increased?
Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. For this reason, we are pleased to see that Mainland Headwear Holdings’ earnings per share have grown 12% annually over the past five years. Earnings per share have grown rapidly, and the company is keeping the majority of its profits with the company. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Since our data began 10 years ago, Mainland Headwear Holdings has increased its dividend by about 8.8% per year on average. It’s encouraging to see the company increasing its dividends as earnings rise, suggesting at least some corporate interest in rewarding shareholders.
From a dividend perspective, should investors buy or avoid Mainland Headwear Holdings? Mainland Headwear Holdings increased earnings per share while simultaneously reinvesting in the business. Unfortunately, it has cut the dividend at least once in the last 10 years, but the conservative payout ratio makes the current dividend look sustainable. There’s a lot to like about Mainland Headwear Holdings, and we’d prioritize a closer look.
With that in mind, an essential part of thorough stock research is being aware of all the risks that stocks currently face. For example, we found 1 warning sign for Mainland Headwear Holdings which we recommend you consider before investing in the company.
If you are looking for strong dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.