Mandarin Oriental International Limited (SGX:M04) will pay a dividend of $0.035 on the 14th of May. This means the dividend yield will be fairly typical at 2.8%.
Check out our latest analysis for Mandarin Oriental International
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This is quite a strong warning sign that the dividend may not be sustainable.
Looking forward, earnings per share could rise by 17.0% over the next year if the trend from the last few years continues. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.07 in 2015, and the most recent fiscal year payment was $0.05. This works out to be a decline of approximately 3.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mandarin Oriental International has impressed us by growing EPS at 17% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Mandarin Oriental International has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Mandarin Oriental International that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.