Beijing Enterprises Holdings Limited (HKG:392) has announced that it will be increasing its periodic dividend on the 27th of October to HK$0.50, which will be 25% higher than last year's comparable payment amount of HK$0.40. This will take the dividend yield to an attractive 4.9%, providing a nice boost to shareholder returns.
Beijing Enterprises Holdings' Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Beijing Enterprises Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 13.8%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.
Beijing Enterprises Holdings Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was HK$0.70, compared to the most recent full-year payment of HK$1.25. This means that it has been growing its distributions at 6.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
We Could See Beijing Enterprises Holdings' Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Beijing Enterprises Holdings has impressed us by growing EPS at 5.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Overall, we always like to see the dividend being raised, but we don't think Beijing Enterprises Holdings will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Beijing Enterprises Holdings is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for Beijing Enterprises 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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