The board of China Boqi Environmental (Holding) Co., Ltd. (HKG:2377) has announced that it will be increasing its dividend by 31% on the 9th of July to CN¥0.046, up from last year's comparable payment of CN¥0.035. The payment will take the dividend yield to 6.6%, which is in line with the average for the industry.
China Boqi Environmental (Holding)'s Payment Could Potentially Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, China Boqi Environmental (Holding)'s earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
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.
See our latest analysis for China Boqi Environmental (Holding)
China Boqi Environmental (Holding)'s Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2019, the dividend has gone from CN¥0.0789 total annually to CN¥0.0429. Doing the maths, this is a decline of about 9.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.
We Could See China Boqi Environmental (Holding)'s Dividend Growing
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. China Boqi Environmental (Holding) has seen EPS rising for the last five years, at 8.8% per annum. China Boqi Environmental (Holding) definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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 picked out 2 warning signs for China Boqi Environmental (Holding) that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.