Xinyi Solar Holdings (HKG:968) Is Increasing Its Dividend To HK$0.17

Xinyi Solar Holdings Limited's (HKG:968) dividend will be increasing to HK$0.17 on 21st of September. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Xinyi Solar Holdings' stock price has increased by 76% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Xinyi Solar Holdings

Xinyi Solar Holdings' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last dividend, Xinyi Solar Holdings is earning enough to cover the payment, but the it makes up 161% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to fall by 10.7%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 63%, which is comfortable for the company to continue in the future.

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$0.34. This implies that the company grew its distributions at a yearly rate of about 52% over that duration. 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Xinyi Solar Holdings has seen EPS rising for the last five years, at 23% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Xinyi Solar Holdings could prove to be a strong dividend payer.

Our Thoughts On Xinyi Solar Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Xinyi Solar Holdings' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Xinyi Solar Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Xinyi Solar Holdings that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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