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

The board of SIIC Environment Holdings Ltd. (SGX:BHK) has announced that it will pay a dividend of S$0.01 per share on the 31st of May. Based on this payment, the dividend yield on the company's stock will be 6.7%, which is an attractive boost to shareholder returns.

Check out our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Dividend Is Well Covered By Earnings

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. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 6.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.4% 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 suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from CN¥0.047 to CN¥0.093. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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 seen EPS rising for the last five years, at 6.3% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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 redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for SIIC Environment Holdings (1 shouldn'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.