China Everbright Water (SGX:U9E) Will Pay A Larger Dividend Than Last Year At S$0.012

China Everbright Water Limited (SGX:U9E) will increase its dividend on the 18th of May to S$0.012. This will take the annual payment from 7.0% to 7.1% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for China Everbright Water

China Everbright Water's Earnings Easily Cover the 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.

If the trend of the last few years continues, EPS will grow by 25.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 5.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

China Everbright Water Doesn't Have A Long Payment History

China Everbright Water's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the dividend has gone from HK$0.019 to HK$0.13. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. China Everbright Water has seen EPS rising for the last five years, at 26% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On China Everbright Water's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While China Everbright Water is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.