Beijing Enterprises Water Group (HKG:371) Will Pay A Dividend Of HK$0.07

Beijing Enterprises Water Group Limited's (HKG:371) investors are due to receive a payment of HK$0.07 per share on 19th of October. Based on this payment, the dividend yield will be 8.7%, which is fairly typical for the industry.

View our latest analysis for Beijing Enterprises Water Group

Beijing Enterprises Water Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend made up a very large portion of earnings and also represented 95% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Looking forward, earnings per share is forecast to rise by 64.0% over the next year. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

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 HK$0.04 in 2013, and the most recent fiscal year payment was HK$0.157. This means that it has been growing its distributions at 15% per annum over that time. Beijing Enterprises Water Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Beijing Enterprises Water Group's EPS has declined at around 14% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Our Thoughts On Beijing Enterprises Water Group's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Beijing Enterprises Water Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Beijing Enterprises Water Group 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Beijing Enterprises Water Group (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Beijing Enterprises Water Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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