The High Risk of a Dividend Cut at MINISO (MNSO): Is the Stock Still a Buy?

MINISO Group Holding (MNSO) has long been a favorite among income-focused investors, but its aggressive international expansion and high dividend payout ratio raise critical questions about sustainability. In H1 2025, the company returned RMB 1.07 billion to shareholders—84% of its adjusted net profit—through dividends and buybacks [1]. While this underscores its commitment to capital returns, the payout ratio is perilously close to the 100% threshold, leaving little room for earnings volatility or unexpected capital demands.

The company’s cash flow from operations, at RMB 1.01 billion for the first half of 2025, appears robust on the surface [1]. However, this figure must now fund both dividend obligations and a rapid international expansion strategy. MINISO added 189 overseas stores in H1 2025 alone, including a flagship location in Amsterdam [6], and plans to maintain a 35% direct-operated store ratio in 2025 [1]. These costs, combined with the U.S. market’s 80% revenue growth [5], suggest significant reinvestment needs. If cash flow dips due to slower international adoption or supply chain disruptions, the dividend could become a drag on liquidity.

Debt metrics offer some reassurance. MINISO’s debt-to-equity ratio of 66.9% [1] and an interest coverage ratio of 107.5x [1] indicate manageable leverage. Yet, the company’s recent interim dividend of $0.2896 per ADS—equivalent to 50% of H1 adjusted net profit [5]—suggests management prioritizes shareholder returns even as it funds growth. This dual focus is commendable, but the 84% payout ratio [1] leaves minimal flexibility to absorb shocks. For context, a 10% decline in adjusted net profit would reduce available cash for dividends by RMB 87 million, potentially forcing a cut to maintain the payout.

The risk is further amplified by MINISO’s reliance on high-growth international markets. While the U.S. and Europe are performing well [5], geopolitical tensions, currency fluctuations, or regulatory hurdles could disrupt expansion. If new store openings slow, the company may face pressure to reduce dividends to preserve cash—a scenario that would likely trigger a sell-off in the stock.

That said, MINISO’s strategic pivot to a “more reasonable capital expenditure structure” [1] and its track record of balancing growth with shareholder returns [5] suggest management is acutely aware of these risks. The recent Amsterdam flagship store [6] and U.S. same-store sales growth [5] demonstrate the brand’s global appeal, which could offset near-term challenges.

For investors, the key question is whether the current dividend yield justifies the risk of a potential cut. At a 3.5% yield (based on the $0.2896 interim dividend and a $25.50 share price), MNSO remains attractive for those willing to tolerate volatility. However, the high payout ratio and capital-intensive expansion make this a high-risk proposition. A prudent approach would be to monitor cash flow trends and international store performance before committing to a long-term buy.

Source:
[1] MINISO (MNSO) Q2 2025 Earnings Call Transcript [https://www.fool.com/earnings/call-transcripts/2025/08/21/miniso-mnso-q2-2025-earnings-call-transcript/]
[2] MINISO Group Announces 2025 June Quarter and Interim Unaudited Financial Results [https://ir.miniso.com/2025-08-21-MINISO-Group-Announces-2025-June-Quarter-and-Interim-Unaudited-Financial-Results]
[3] MINISO Approves Dividend and Opens Amsterdam Flagship [https://www.ainvest.com/news/miniso-approves-dividend-opens-amsterdam-flagship-global-growth-strategy-2508/]
[4] MINISO GROUP HLDG LTD To Go Ex-Dividend On September [https://www.moomoo.com/news/post/57335183/miniso-group-hldg-ltd-to-go-ex-dividend-on-september]
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