China Boqi Environmental (Holding) (HKG:2377) Will Pay A Larger Dividend Than Last Year At CN¥0.035

The board of China Boqi Environmental (Holding) Co., Ltd. (HKG:2377) has announced that the dividend on 10th of July will be increased to CN¥0.035, which will be 17% higher than last year's payment of CN¥0.03 which covered the same period. Despite this raise, the dividend yield of 4.8% is only a modest boost to shareholder returns.

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

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

If it is predictable over a long period, even low dividend yields can be attractive. 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.

Looking forward, earnings per share is forecast to rise by 16.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

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

Looking back, China Boqi Environmental (Holding)'s dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from CN¥0.0789 total annually to CN¥0.0323. Dividend payments have fallen sharply, down 59% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. China Boqi Environmental (Holding)'s EPS has fallen by approximately 11% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

China Boqi Environmental (Holding)'s Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While China Boqi Environmental (Holding) is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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. 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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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.