EIT Environmental Development GroupLtd's (SZSE:300815) Dividend Is Being Reduced To CN¥0.20

EIT Environmental Development Group Co.,Ltd (SZSE:300815) has announced that on 12th of June, it will be paying a dividend ofCN¥0.20, which a reduction from last year's comparable dividend. However, the dividend yield of 1.6% still remains in a typical range for the industry.

See our latest analysis for EIT Environmental Development GroupLtd

EIT Environmental Development GroupLtd's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. EIT Environmental Development GroupLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 58.5%. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

EIT Environmental Development GroupLtd's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of CN¥0.0788 in 2020 to the most recent total annual payment of CN¥0.20. This means that it has been growing its distributions at 26% per annum over that time. EIT Environmental Development GroupLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that EIT Environmental Development GroupLtd has been growing its earnings per share at 15% a year over the past five years. EIT Environmental Development GroupLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On EIT Environmental Development GroupLtd's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While EIT Environmental Development GroupLtd is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for EIT Environmental Development GroupLtd (1 shouldn't be ignored!) that you should be aware of before investing. Is EIT Environmental Development GroupLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.