Xingfa Aluminium Holdings (HKG:98) Will Pay A Larger Dividend Than Last Year At HK$0.80

Xingfa Aluminium Holdings Limited's (HKG:98) dividend will be increasing to HK$0.80 on 24th of June. This takes the dividend yield from 7.6% to 7.9%, which shareholders will be pleased with.

See our latest analysis for Xingfa Aluminium Holdings

Xingfa Aluminium Holdings' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Xingfa Aluminium Holdings' earnings easily 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 24.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Xingfa Aluminium Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2013, the dividend has gone from CN¥0.04 to CN¥0.65. This means that it has been growing its distributions at 36% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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 Xingfa Aluminium Holdings has been growing its earnings per share at 24% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Xingfa Aluminium Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Xingfa Aluminium Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Xingfa Aluminium Holdings that investors should know about before committing capital to this stock. 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.