Xinyi Solar Holdings (HKG:968) Has Announced That Its Dividend Will Be Reduced To HK$0.10

Xinyi Solar Holdings Limited (HKG:968) is reducing its dividend to HK$0.10 on the 6th of July. However, the dividend yield of 2.2% still remains in a typical range for the industry.

See our latest analysis for Xinyi Solar Holdings

Xinyi Solar Holdings' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Xinyi Solar Holdings' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 9.5%. If the dividend continues on this path, the payout ratio could be 53% by next year, which we think can be pretty sustainable going forward.

Xinyi Solar Holdings' Dividend Has Lacked Consistency

Xinyi Solar Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from HK$0.018 to HK$0.27. This means that it has been growing its distributions at 40% 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. Xinyi Solar Holdings has impressed us by growing EPS at 13% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 24 Xinyi Solar Holdings analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.