Xingfa Aluminium Holdings' (HKG:98) Shareholders Will Receive A Bigger Dividend Than Last Year

Xingfa Aluminium Holdings Limited's (HKG:98) dividend will be increasing from last year's payment of the same period to CN¥0.64 on 24th of June. This makes the dividend yield 8.4%, which is above the industry average.

See our latest analysis for Xingfa Aluminium Holdings

Xingfa Aluminium Holdings' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Xingfa Aluminium Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 10.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.04 in 2014, and the most recent fiscal year payment was CN¥0.59. This means that it has been growing its distributions at 31% per annum over that time. Xingfa Aluminium Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Xingfa Aluminium Holdings has grown earnings per share at 10% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Xingfa Aluminium Holdings' prospects of growing its dividend payments in the future.

We Really Like Xingfa Aluminium Holdings' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 Xingfa Aluminium Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.