China Boqi Environmental (Holding) (HKG:2377) Has Re-Affirmed Its Dividend Of HK$0.074

China Boqi Environmental (Holding) Co., Ltd. (HKG:2377) has announced that it will pay a dividend of HK$0.074 per share on the 14th of July. This means the dividend yield will be fairly typical at 5.8%.

View our latest analysis for China Boqi Environmental (Holding)

China Boqi Environmental (Holding)'s Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. China Boqi Environmental (Holding) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 6.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

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

Even in its short history, we have seen the dividend cut. The dividend has gone from CN¥0.079 in 2019 to the most recent annual payment of CN¥0.062. The dividend has shrunk at around 7.8% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

China Boqi Environmental (Holding) Could Grow Its Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. China Boqi Environmental (Holding) has seen EPS rising for the last five years, at 6.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for China Boqi Environmental (Holding)'s prospects of growing its dividend payments in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about China Boqi Environmental (Holding)'s payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for China Boqi Environmental (Holding) (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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