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 it will be increasing its dividend by 17% on the 10th of July to CN¥0.035, up from last year's comparable payment of CN¥0.03. Although the dividend is now higher, the yield is only 5.2%, which is below the industry average.

See our latest analysis for China Boqi Environmental (Holding)

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

Even a low dividend yield can be attractive if it is sustained for years on end. However, China Boqi Environmental (Holding)'s earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow 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

Looking back, China Boqi Environmental (Holding)'s dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2019, the annual payment back then was CN¥0.0789, compared to the most recent full-year payment of CN¥0.0323. Dividend payments have fallen sharply, down 59% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. China Boqi Environmental (Holding)'s EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into 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.

In Summary

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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for China Boqi Environmental (Holding) that investors should take into consideration. 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.