Xiamen Kingdomway Group (SZSE:002626) Has Affirmed Its Dividend Of CN¥0.20

Xiamen Kingdomway Group Company's (SZSE:002626) investors are due to receive a payment of CN¥0.20 per share on 6th of June. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.

See our latest analysis for Xiamen Kingdomway Group

Xiamen Kingdomway Group's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Xiamen Kingdomway Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 11.3% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 58%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CN¥0.156 in 2014 to the most recent total annual payment of CN¥0.20. This means that it has been growing its distributions at 2.5% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

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. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Xiamen Kingdomway Group's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good 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. However, there are other things to consider for investors when analysing stock performance. To that end, Xiamen Kingdomway Group has 2 warning signs (and 1 which is potentially serious) we think 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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