Xinxing Ductile Iron Pipes (SZSE:000778) Is Paying Out Less In Dividends Than Last Year

Xinxing Ductile Iron Pipes Co., Ltd.'s (SZSE:000778) dividend is being reduced from last year's payment covering the same period to CN¥0.06 on the 12th of July. This means that the annual payment is 1.7% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Xinxing Ductile Iron Pipes

Xinxing Ductile Iron Pipes' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Xinxing Ductile Iron Pipes' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 15.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from CN¥0.0667 total annually to CN¥0.06. This works out to be a decline of approximately 1.1% per year 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

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. Over the past five years, it looks as though Xinxing Ductile Iron Pipes' EPS has declined at around 10% a year. 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. 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.

Our Thoughts On Xinxing Ductile Iron Pipes' Dividend

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Xinxing Ductile Iron Pipes that you should be aware of before investing. Is Xinxing Ductile Iron Pipes not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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