Xin HeeLtd (SZSE:003016) Is Reducing Its Dividend To CN¥0.23

Xin Hee Co.,Ltd.'s (SZSE:003016) dividend is being reduced from last year's payment covering the same period to CN¥0.23 on the 24th of June. This means that the annual payment will be 3.4% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Xin HeeLtd

Xin HeeLtd's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 71.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 90%, which is on the higher side, but certainly still feasible.

Xin HeeLtd's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 3 years was CN¥0.40 in 2021, and the most recent fiscal year payment was CN¥0.23. Dividend payments have fallen sharply, down 43% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Xin HeeLtd's earnings per share has shrunk at 27% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Xin HeeLtd's Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

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. Case in point: We've spotted 2 warning signs for Xin HeeLtd (of which 1 is significant!) you should know about. 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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