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MINISO Group Holding Limited (NYSE:MNSO) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of April to CN¥0.3268. This will take the annual payment to 3.6% of the stock price, which is above what most companies in the industry pay.

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MINISO Group Holding's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 104% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 67.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 5.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for MINISO Group Holding

MINISO Group Holding's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2021, the dividend has gone from CN¥1 total annually to CN¥4.74. This works out to be a compound annual growth rate (CAGR) of approximately 47% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that MINISO Group Holding has been growing its earnings per share at 65% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that MINISO Group Holding could prove to be a strong dividend payer.

Our Thoughts On MINISO Group Holding's Dividend

Overall, we always like to see the dividend being raised, but we don't think MINISO Group Holding will make a great income stock. While MINISO Group Holding is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.