Beijing Enterprises Water Group (HKG:371) Has Announced That Its Dividend Will Be Reduced To HK$0.067

Beijing Enterprises Water Group Limited (HKG:371) is reducing its dividend to HK$0.067 on the 30th of June. Despite the cut, the dividend yield of 6.3% will still be comparable to other companies in the industry.

View our latest analysis for Beijing Enterprises Water Group

Beijing Enterprises Water Group's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Beijing Enterprises Water Group was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 9.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Beijing Enterprises Water Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was HK$0.03 in 2012, and the most recent fiscal year payment was HK$0.16. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Beijing Enterprises Water Group May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Beijing Enterprises Water Group has only grown its earnings per share at 2.0% per annum over the past five years. While growth may be thin on the ground, Beijing Enterprises Water Group could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Beijing Enterprises Water Group's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Beijing Enterprises Water Group is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Beijing Enterprises Water Group you should be aware of, and 1 of them shouldn't be ignored. 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.