The board of China Boqi Environmental (Holding) Co., Ltd. (HKG:2377) has announced that the dividend on 9th of July will be increased to CN¥0.046, which will be 31% higher than last year's payment of CN¥0.035 which covered the same period. Although the dividend is now higher, the yield is only 5.9%, which is below the industry average.
China Boqi Environmental (Holding)'s Payment Could Potentially Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, China Boqi Environmental (Holding) was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 8.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.
View our latest analysis for China Boqi Environmental (Holding)
China Boqi Environmental (Holding)'s Dividend Has Lacked Consistency
Looking back, China Boqi Environmental (Holding)'s dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was CN¥0.0789, compared to the most recent full-year payment of CN¥0.0429. The dividend has shrunk at around 9.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
China Boqi Environmental (Holding) Could Grow Its Dividend
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. China Boqi Environmental (Holding) has impressed us by growing EPS at 8.8% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for China Boqi Environmental (Holding)'s prospects of growing its dividend payments in the future.
China Boqi Environmental (Holding) Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that China Boqi Environmental (Holding) is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an 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. For example, we've picked out 3 warning signs for China Boqi Environmental (Holding) that investors should know about before committing capital to this stock. Is China Boqi Environmental (Holding) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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