Stock Analysis

Perennial Energy Holdings (HKG:2798) Is Due To Pay A Dividend Of HK$0.037

SEHK:2798
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Perennial Energy Holdings Limited (HKG:2798) has announced that it will pay a dividend of HK$0.037 per share on the 27th of June. Including this payment, the dividend yield on the stock will be 2.2%, which is a modest boost for shareholders' returns.

View our latest analysis for Perennial Energy Holdings

Perennial Energy Holdings' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Perennial Energy Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 15.2% over the next 12 months. 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 March 28th 2022

Perennial Energy Holdings 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 2020, the dividend has gone from CN¥0.021 to CN¥0.03. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Perennial Energy Holdings has grown earnings per share at 15% per year over the past five years. Perennial Energy Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Perennial Energy Holdings' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Perennial Energy Holdings that you should be aware of before investing. Is Perennial Energy Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.