Xtep International Holdings (HKG:1368) Is Increasing Its Dividend To CN¥0.447

Xtep International Holdings Limited (HKG:1368) will increase its dividend from last year's comparable payment on the 1st of January to CN¥0.447. This will take the annual payment to 4.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Xtep International Holdings

Xtep International Holdings' Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Xtep International Holdings' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to grow by 48.8% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was CN¥0.159, compared to the most recent full-year payment of CN¥0.199. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. 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.

We Could See Xtep International Holdings' Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Xtep International Holdings has been growing its earnings per share at 6.1% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Xtep International Holdings that investors need to be conscious of moving forward. Is Xtep International Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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