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 10.0%, providing a nice boost to shareholder returns.
View 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
Looking back, China Everbright Water's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. 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 implies that the company grew its distributions at a yearly rate of about 27% 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 Looks Likely To Grow
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. 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. With a decent amount of growth and a low payout ratio, we think this bodes well for China Everbright Water's prospects of growing its dividend payments in the future.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think China Everbright Water's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for China Everbright Water (1 can't be ignored!) that you should be aware of before investing. 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.
