SIIC Environment Holdings (SGX:BHK) Is Due To Pay A 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. This makes the dividend yield 6.8%, which will augment investor returns quite nicely.

See our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, SIIC Environment Holdings' earnings easily covered the dividend, but free cash flows were negative. 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.

If the trend of the last few years continues, EPS will grow by 5.0% over the next 12 months. 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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the first annual payment was CN¥0.047, compared to the most recent full-year payment of 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.

SIIC Environment Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, SIIC Environment Holdings has only grown its earnings per share at 5.0% per annum over the past five years. While growth may be thin on the ground, SIIC Environment Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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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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.