SIIC Environment Holdings (SGX:BHK) Has Re-Affirmed Its Dividend Of S$0.01

SIIC Environment Holdings Ltd. (SGX:BHK) will pay a dividend of S$0.01 on the 31st of May. This means the annual payment is 6.1% of the current stock price, which is above the average for the industry.

See our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, SIIC Environment Holdings was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 6.3% 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 5.4%, 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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from CN¥0.047 in 2017 to the most recent annual payment of CN¥0.093. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See SIIC Environment Holdings' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. SIIC Environment Holdings has seen EPS rising for the last five years, at 6.3% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think SIIC Environment 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for SIIC Environment Holdings you should be aware of, and 1 of them shouldn't be ignored. 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.