Xinlei Compressor (SZSE:301317) Is Paying Out A Dividend Of CN¥0.30

The board of Xinlei Compressor Co., Ltd. (SZSE:301317) has announced that it will pay a dividend on the 3rd of June, with investors receiving CN¥0.30 per share. This means that the annual payment will be 1.7% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Xinlei Compressor

Xinlei Compressor's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Xinlei Compressor was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

If the company can't turn things around, EPS could fall by 3.6% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 84% in the next 12 months which is on the higher end of the range we would say is sustainable.

Xinlei Compressor Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Xinlei Compressor May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Xinlei Compressor has seen earnings per share falling at 3.6% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Xinlei Compressor's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Xinlei Compressor's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Xinlei Compressor (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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