Kimou Environmental Holding's (HKG:6805) Upcoming Dividend Will Be Larger Than Last Year's

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. The payment will take the dividend yield to 7.6%, which is in line with the average for the industry.

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

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 101% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only . 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. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 119% over the next year.

Check out our latest analysis for Kimou Environmental Holding

Kimou Environmental Holding Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2023, the annual payment back then was CN¥0.0437, compared to the most recent full-year payment of CN¥0.091. This works out to be a compound annual growth rate (CAGR) of approximately 44% 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.

Kimou Environmental Holding Might Find It Hard To Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Kimou Environmental Holding has been growing its earnings per share at 14% a 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. 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. For example, we've picked out 1 warning sign for Kimou 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.