Xinyi Glass Holdings Limited's (HKG:868) dividend is being reduced from last year's payment covering the same period to CN¥0.10 on the 30th of July. Based on this payment, the dividend yield will be 5.5%, which is lower than the average for the industry.
Our free stock report includes 1 warning sign investors should be aware of before investing in Xinyi Glass Holdings. Read for free now.Xinyi Glass Holdings' Projected Earnings Seem Likely To Cover Future Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Xinyi Glass Holdings' dividend was only 49% of earnings, however it was paying out 190% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
The next year is set to see EPS grow by 15.8%. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Xinyi Glass Holdings
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from CN¥0.12 total annually to CN¥0.381. This means that it has been growing its distributions at 12% per annum over that time. Xinyi Glass Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend's Growth Prospects Are Limited
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. In the last five years, Xinyi Glass Holdings' earnings per share has shrunk at approximately 5.0% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Xinyi Glass Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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