SIIC Environment Holdings (SGX:BHK) Is Due To Pay A Dividend Of S$0.01

SIIC Environment Holdings Ltd. (SGX:BHK) will pay a dividend of S$0.01 on the 31st of May. Based on this payment, the dividend yield on the company's stock will be 6.8%, which is an attractive boost to shareholder returns.

Check out our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.

If the trend of the last few years continues, EPS will grow by 6.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 5.4% by next year, which we think can be pretty sustainable going forward.

SIIC Environment Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 5 years was CN¥0.047 in 2017, and the most recent fiscal year payment was CN¥0.093. This means that it has been growing its distributions at 14% per annum over that time. SIIC Environment Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see SIIC Environment Holdings has been growing its earnings per share at 6.3% a 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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for SIIC Environment Holdings (of which 1 doesn't sit too well with us!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.