China Boqi Environmental (Holding)'s (HKG:2377) Upcoming Dividend Will Be Larger Than Last Year's

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. Although the dividend is now higher, the yield is only 5.0%, which is below the industry average.

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. However, China Boqi Environmental (Holding)'s earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 16.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

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

It's comforting to see that China Boqi Environmental (Holding) has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 5 years was CN¥0.0789 in 2019, and the most recent fiscal year payment was CN¥0.0323. The dividend has fallen 59% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

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. Over the past five years, it looks as though China Boqi Environmental (Holding)'s EPS has declined at around 11% a year. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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

Overall, we always like to see the dividend being raised, but we don't think China Boqi Environmental (Holding) will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.