Xi'an Global Printing (SZSE:002799) Is Increasing Its Dividend To CN¥0.036

Xi'an Global Printing Co., Ltd. (SZSE:002799) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of August to CN¥0.036. Even though the dividend went up, the yield is still quite low at only 0.6%.

See our latest analysis for Xi'an Global Printing

Xi'an Global Printing Might Find It Hard To Continue The Dividend

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Even though Xi'an Global Printing is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Looking forward, earnings per share could 35.8% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Xi'an Global Printing's Dividend Has Lacked Consistency

Xi'an Global Printing has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was CN¥0.0794, compared to the most recent full-year payment of CN¥0.036. This works out to a decline of approximately 55% 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. Earnings per share has been sinking by 36% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of Xi'an Global Printing's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Xi'an Global Printing that you should be aware of before investing. 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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