Xinyi Glass Holdings Limited (HKG:868) stock is about to trade ex-dividend in 4 days time. This means that investors who purchase shares on or after the 20th of August will not receive the dividend, which will be paid on the 3rd of September.
Xinyi Glass Holdings’s upcoming dividend is HK$0.25 a share, following on from the last 12 months, when the company distributed a total of HK$0.52 per share to shareholders. Last year’s total dividend payments show that Xinyi Glass Holdings has a trailing yield of 7.0% on the current share price of HK$7.43. If you buy this business for its dividend, you should have an idea of whether Xinyi Glass Holdings’s dividend is reliable and sustainable. So we need to investigate whether Xinyi Glass Holdings can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Xinyi Glass Holdings paid out a comfortable 48% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Xinyi Glass Holdings paid out more free cash flow than it generated – 134%, to be precise – last year, which we think is concerningly high. It’s hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we’d wonder how the company justifies this payout level.
While Xinyi Glass Holdings’s dividends were covered by the company’s reported profits, cash is somewhat more important, so it’s not great to see that the company didn’t generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Xinyi Glass Holdings’s ability to maintain its dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it’s a relief to see Xinyi Glass Holdings earnings per share are up 5.2% per annum over the last five years. Earnings have been growing at a steady rate, but we’re concerned dividend payments consumed most of the company’s cash flow over the past year.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Xinyi Glass Holdings has lifted its dividend by approximately 17% a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has Xinyi Glass Holdings got what it takes to maintain its dividend payments? Xinyi Glass Holdings has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall, it’s not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Wondering what the future holds for Xinyi Glass Holdings? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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