Xingfa Aluminium Holdings (HKG:98) Is Paying Out A Dividend Of CN¥0.64

The board of Xingfa Aluminium Holdings Limited (HKG:98) has announced that it will pay a dividend on the 24th of June, with investors receiving CN¥0.64 per share. This means the annual payment is 7.7% of the current stock price, which is above the average for the industry.

Xingfa Aluminium Holdings' Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Xingfa Aluminium Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 6.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

View our latest analysis for Xingfa Aluminium Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from CN¥0.04 total annually to CN¥0.577. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Growth Potential

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. We are encouraged to see that Xingfa Aluminium Holdings has grown earnings per share at 6.3% per year over the past five years. Xingfa Aluminium Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we think Xingfa Aluminium Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Taking the debate a bit further, we've identified 1 warning sign for Xingfa Aluminium Holdings that investors need to be conscious of moving forward. Is Xingfa Aluminium Holdings 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.