ENN Energy Holdings (HKG:2688) Will Pay A Larger Dividend Than Last Year At CN¥2.27

ENN Energy Holdings Limited (HKG:2688) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of July to CN¥2.27. This takes the annual payment to 2.9% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for ENN Energy Holdings

ENN Energy Holdings' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. ENN Energy Holdings was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to rise by 80.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.342 in 2013, and the most recent fiscal year payment was CN¥2.60. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that ENN Energy Holdings has grown earnings per share at 15% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think ENN Energy Holdings' payments are rock solid. While ENN Energy Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think ENN Energy Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for ENN Energy Holdings that investors should know about before committing capital to this stock. 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.