SIIC Environment Holdings (SGX:BHK) Has Affirmed Its Dividend Of SGD 0.01

SIIC Environment Holdings Ltd.'s ( SGX:BHK ) investors are due to receive a payment of SGD 0.01 per share on 31st of May. Based on this payment, the dividend yield on the company's stock will be 7.5%, which is an attractive boost to shareholder returns.

See our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. 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.

Looking forward, earnings per share could rise by 7.1% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 4.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

SIIC Environment Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of SGD0.01 in 2017 to the most recent total annual payment of SGD0.015. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year 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.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. SIIC Environment Holdings has impressed us by growing EPS at 7.1% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for SIIC Environment Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On SIIC Environment Holdings' Dividend

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

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 identified 2 warning signs for SIIC Environment Holdings (1 can't be ignored!) that you should be aware of before investing. 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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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.