Dynagreen Environmental Protection Group (HKG:1330) Is Increasing Its Dividend To CN¥0.1316

The board of Dynagreen Environmental Protection Group Co., Ltd. (HKG:1330) has announced that it will be increasing its dividend by 13% on the 26th of July to CN¥0.1316, up from last year's comparable payment of CN¥0.117. The payment will take the dividend yield to 5.0%, which is in line with the average for the industry.

Check out our latest analysis for Dynagreen Environmental Protection Group

Dynagreen Environmental Protection Group'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. Prior to this announcement, Dynagreen Environmental Protection Group's dividend was only 23% of earnings, however it was paying out 110% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

If the trend of the last few years continues, EPS will grow by 20.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dynagreen Environmental Protection Group's Dividend Has Lacked Consistency

It's comforting to see that Dynagreen Environmental Protection Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the dividend has gone from CN¥0.03 total annually to CN¥0.12. This works out to be a compound annual growth rate (CAGR) of approximately 22% 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Dynagreen Environmental Protection Group has grown earnings per share at 21% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Dynagreen Environmental Protection Group is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Dynagreen Environmental Protection Group (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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