Mandarin Oriental International Limited (SGX:M04) has announced that it will pay a dividend of $0.015 per share on the 16th of October. The dividend yield will be 4.2% based on this payment which is still above the industry average.

Check out our latest analysis for Mandarin Oriental International

Mandarin Oriental International's Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Mandarin Oriental International isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Over the next year, EPS could expand by 2.2% if recent trends continue. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The payments haven't really changed that much since 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.2% per annum over the last five years, which admittedly is a bit slow. Mandarin Oriental International isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mandarin Oriental International's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Mandarin Oriental International that investors should know about before committing capital to this stock. Is Mandarin Oriental International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.