The board of Xtep International Holdings Limited (HKG:1368) has announced that it will pay a dividend of CN¥0.095 per share on the 30th of June. This takes the dividend yield to 4.7%, which shareholders will be pleased with.
Our free stock report includes 1 warning sign investors should be aware of before investing in Xtep International Holdings. Read for free now.Estimates Indicate Xtep International Holdings' Could Struggle to Maintain Dividend Payments In The Future
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Xtep International Holdings' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
The next 12 months is set to see EPS grow by 20.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 126%, which probably can't continue without putting some pressure on the balance sheet.
View our latest analysis for Xtep International Holdings
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.126 in 2015 to the most recent total annual payment of CN¥0.23. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
We Could See Xtep International Holdings' Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Xtep International Holdings has seen EPS rising for the last five years, at 9.8% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Xtep International Holdings Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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 of these factors considered, we think this has solid potential as a dividend 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 instance, we've picked out 1 warning sign for Xtep International Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.