Kimou Environmental Holding (HKG:6805) Is Increasing Its Dividend To CN¥0.10

Kimou Environmental Holding Limited (HKG:6805) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of July to CN¥0.10. This will take the annual payment to 9.1% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Kimou Environmental Holding

Kimou Environmental Holding Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Kimou Environmental Holding's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Earnings per share could rise by 7.6% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 113% over the next year.

Kimou Environmental Holding Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Kimou Environmental Holding has impressed us by growing EPS at 7.6% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Kimou Environmental Holding's payments are rock solid. 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. We don't think Kimou Environmental Holding is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Kimou Environmental Holding (of which 1 doesn't sit too well with us!) you should know about. 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.