Stock Analysis

Perennial Energy Holdings (HKG:2798) Is Reducing Its Dividend To CN¥0.05

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Perennial Energy Holdings Limited (HKG:2798) has announced that on 5th of July, it will be paying a dividend ofCN¥0.05, which a reduction from last year's comparable dividend. However, the dividend yield of 4.8% is still a decent boost to shareholder returns.

View our latest analysis for Perennial Energy Holdings

Perennial Energy Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Perennial Energy Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 13.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

SEHK:2798 Historic Dividend April 25th 2024

Perennial Energy Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of CN¥0.0207 in 2020 to the most recent total annual payment of CN¥0.046. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Perennial Energy Holdings has seen EPS rising for the last five years, at 14% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Perennial Energy Holdings Looks Like A Great Dividend Stock

Overall, we think that Perennial Energy Holdings could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an 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. For instance, we've picked out 1 warning sign for Perennial Energy Holdings that investors should take into consideration. 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.