China Everbright Water (SGX:U9E) Will Pay A Dividend Of HK$0.0099

The board of China Everbright Water Limited (SGX:U9E) has announced that it will pay a dividend on the 12th of September, with investors receiving HK$0.0099 per share. The dividend yield will be 7.8% based on this payment which is still above the industry average.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

China Everbright Water's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, China Everbright Water's 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.

Over the next year, EPS could expand by 4.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 6.4%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for China Everbright Water

China Everbright Water's Dividend Has Lacked Consistency

China Everbright Water has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was HK$0.0187, compared to the most recent full-year payment of HK$0.119. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. 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's Growth Prospects Are Limited

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. Earnings per share has been crawling upwards at 4.1% per year. While growth may be thin on the ground, China Everbright Water could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On China Everbright Water's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about China Everbright Water's payments, as there could be some issues with sustaining them into the future. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for China Everbright Water you should be aware of, and 1 of them can't be ignored. Is China Everbright Water 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.