Stock Analysis

Perennial Energy Holdings (HKG:2798) Has Affirmed Its Dividend Of HK$0.037

SEHK:2798
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Perennial Energy Holdings Limited (HKG:2798) will pay a dividend of HK$0.037 on the 27th of June. This payment means the dividend yield will be 2.5%, which is below the average for the industry.

View our latest analysis for Perennial Energy Holdings

Perennial Energy Holdings' Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Perennial Energy Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 15.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.

historic-dividend
SEHK:2798 Historic Dividend May 12th 2022

Perennial Energy Holdings Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the first annual payment was CN¥0.021, compared to the most recent full-year payment of CN¥0.03. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Perennial Energy Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Perennial Energy Holdings has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Perennial Energy Holdings' prospects of growing its dividend payments in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Perennial Energy Holdings' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Perennial Energy Holdings that investors need to be conscious of moving forward. 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.