China Boqi Environmental (Holding) (HKG:2377) Has Announced That Its Dividend Will Be Reduced To CN¥0.03

China Boqi Environmental (Holding) Co., Ltd. (HKG:2377) is reducing its dividend from last year's comparable payment to CN¥0.03 on the 12th of July. This means that the annual payment is 3.4% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for China Boqi Environmental (Holding)

China Boqi Environmental (Holding)'s Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, China Boqi Environmental (Holding) was paying only paying out a fraction of earnings, but the payment was a massive 113% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 2.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

China Boqi Environmental (Holding)'s Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2019, the annual payment back then was CN¥0.0789, compared to the most recent full-year payment of CN¥0.0262. This works out to a decline of approximately 67% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, China Boqi Environmental (Holding)'s EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, China Boqi Environmental (Holding) could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On China Boqi Environmental (Holding)'s Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for China Boqi Environmental (Holding) that investors should know about before committing capital to this stock. Is China Boqi Environmental (Holding) 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.