Xinyuan Property Management Service (Cayman) (HKG:1895) Has Announced A Dividend Of CN¥0.0277

Xinyuan Property Management Service (Cayman) Ltd. (HKG:1895) will pay a dividend of CN¥0.0277 on the 24th of September. The dividend yield of 9.1% is still a nice boost to shareholder returns, despite the cut.

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Xinyuan Property Management Service (Cayman)'s Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Xinyuan Property Management Service (Cayman)'s dividend was only 31% of earnings, however it was paying out 108% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Unless the company can turn things around, EPS could fall by 9.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 37%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Xinyuan Property Management Service (Cayman)

Xinyuan Property Management Service (Cayman)'s Dividend Has Lacked Consistency

It's comforting to see that Xinyuan Property Management Service (Cayman) has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2020, the annual payment back then was CN¥0.0472, compared to the most recent full-year payment of CN¥0.0498. This means that it has been growing its distributions at 1.0% 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 Is Doubtful

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. Xinyuan Property Management Service (Cayman) has seen earnings per share falling at 9.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 identified 4 warning signs for Xinyuan Property Management Service (Cayman) (1 shouldn't be ignored!) that you should be aware of before investing. 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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