HaiXin FoodsLtd's (SZSE:002702) Shareholders Will Receive A Smaller Dividend Than Last Year

HaiXin Foods Co.,Ltd (SZSE:002702) has announced that on 6th of June, it will be paying a dividend ofCN¥0.04, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.0%, which only provides a modest boost to overall returns.

See our latest analysis for HaiXin FoodsLtd

HaiXin FoodsLtd's Distributions May Be Difficult To Sustain

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Despite not generating a profit, HaiXin FoodsLtd is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Over the next year, EPS might fall by 8.3% based on recent performance. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.0294 in 2014 to the most recent total annual payment of CN¥0.04. This means that it has been growing its distributions at 3.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that HaiXin FoodsLtd's earnings per share has fallen at approximately 8.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

We should note that HaiXin FoodsLtd has issued stock equal to 16% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

HaiXin FoodsLtd's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, HaiXin FoodsLtd has 3 warning signs (and 2 which are concerning) we think you should know about. Is HaiXin FoodsLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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