SIIC Environment Holdings' (SGX:BHK) Dividend Will Be CN¥0.005

The board of SIIC Environment Holdings Ltd. (SGX:BHK) has announced that it will pay a dividend on the 28th of September, with investors receiving CN¥0.005 per share. The dividend yield will be 7.4% based on this payment which is still above the industry average.

See our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. SIIC Environment Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 7.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.8% by next year, which is in a pretty sustainable range.

SIIC Environment Holdings' Dividend Has Lacked Consistency

SIIC Environment Holdings has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was CN¥0.0473, compared to the most recent full-year payment of CN¥0.0802. This means that it has been growing its distributions at 9.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See SIIC Environment Holdings' Dividend Growing

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. It's encouraging to see that SIIC Environment Holdings has been growing its earnings per share at 7.8% a 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.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SIIC Environment Holdings' payments, as there could be some issues with sustaining them into the future. While SIIC Environment Holdings 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, SIIC Environment Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is SIIC Environment Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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