SIIC Environment Holdings (SGX:BHK) Has Announced A Dividend Of CN¥0.006

The board of SIIC Environment Holdings Ltd. (SGX:BHK) has announced that it will pay a dividend on the 31st of May, with investors receiving CN¥0.006 per share. However, the dividend yield of 6.6% is still a decent boost to shareholder returns.

View our latest analysis for SIIC Environment Holdings

SIIC Environment 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. However, prior to this announcement, SIIC Environment Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 2.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 4.8%, which is in the range that makes us comfortable with the sustainability of the dividend.

SIIC Environment Holdings' Dividend Has Lacked Consistency

It's comforting to see that SIIC Environment Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from CN¥0.0473 total annually to CN¥0.0588. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, SIIC Environment Holdings has only grown its earnings per share at 2.5% per annum over the past five years. If SIIC Environment Holdings is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Even though the dividend was cut this year, we think SIIC Environment Holdings has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. To that end, SIIC Environment Holdings has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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