Yahoo Finance China Everbright Water (SGX:U9E) Is Due To Pay A Dividend Of HK$0.0099
The board of China Everbright Water Limited (SGX:U9E) has announced that it will pay a dividend of HK$0.0099 per share on the 24th of May. This will take the dividend yield to an attractive 9.6%, providing a nice boost to shareholder returns.
See our latest analysis for China Everbright Water
China Everbright Water's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, China Everbright Water was earning enough to cover the dividend, but free cash flows weren't positive. 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 10.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.7% by next year, which is in a pretty sustainable range.
China Everbright Water's 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. The annual payment during the last 8 years was HK$0.0187 in 2016, and the most recent fiscal year payment was HK$0.124. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year over that time. 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 Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that China Everbright Water has been growing its earnings per share at 10% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, China Everbright Water has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is China Everbright Water not quite the opportunity you were looking for? Why not check out our selection of top 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.
