SIIC Environment Holdings (SGX:BHK) Will Pay 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. This means the annual payment is 6.6% of the current stock price, which is above the average for the industry.

See our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, SIIC Environment Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 2.5% 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 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 suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of CN¥0.0473 in 2017 to the most recent total annual payment of CN¥0.0588. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. 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.

SIIC Environment Holdings May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, SIIC Environment Holdings has only grown its earnings per share at 2.5% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On SIIC Environment Holdings' Dividend

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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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