Kimou Environmental Holding (HKG:6805) Is Increasing Its Dividend To CN¥0.15

Kimou Environmental Holding Limited's (HKG:6805) dividend will be increasing from last year's payment of the same period to CN¥0.15 on 27th of June. This takes the annual payment to 8.2% of the current stock price, which is about average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Kimou Environmental Holding's stock price has increased by 52% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Kimou Environmental Holding's Projections Indicate Future Payments May Be Unsustainable

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Kimou Environmental Holding's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share could rise by 14.2% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 119%, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for Kimou Environmental Holding

Kimou Environmental Holding Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2023, the dividend has gone from CN¥0.0437 total annually to CN¥0.139. This works out to be a compound annual growth rate (CAGR) of approximately 78% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Kimou Environmental Holding has impressed us by growing EPS at 14% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

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. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Kimou Environmental Holding you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.