SIIC Environment Holdings (SGX:BHK) Will Pay A Dividend Of CN¥0.006

SIIC Environment Holdings Ltd. (SGX:BHK) has announced that it will pay a dividend of CN¥0.006 per share on the 31st of May. The yield is still above the industry average at 6.4%.

View our latest analysis for SIIC Environment Holdings

SIIC Environment Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, SIIC Environment Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

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 on this path, the payout ratio could be 4.8% by next year, which we think can be pretty sustainable going forward.

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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.0473 in 2017 to the most recent total annual payment of CN¥0.0583. This works out to be a compound annual growth rate (CAGR) of approximately 3.0% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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 2.5% per annum over the past five years. If SIIC Environment Holdings is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, we think that SIIC Environment Holdings could make a reasonable income stock, even though it did cut the dividend this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Case in point: We've spotted 2 warning signs for SIIC Environment Holdings (of which 1 is a bit unpleasant!) 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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