Xinyi Solar Holdings (HKG:968) Is Paying Out Less In Dividends Than Last Year

Xinyi Solar Holdings Limited (HKG:968) has announced that on 10th of October, it will be paying a dividend ofCN¥0.042, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 2.7%, which is lower than the average for the industry.

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Xinyi Solar Holdings' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Xinyi Solar Holdings' Could Struggle to Maintain Dividend Payments In The Future

Xinyi Solar Holdings' Future Dividends May Potentially Be At Risk

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Xinyi Solar Holdings is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 228%.

Check out our latest analysis for Xinyi Solar Holdings

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¥0.0252 in 2015, and the most recent fiscal year payment was CN¥0.0768. This implies that the company grew its distributions at a yearly rate of about 12% 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.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Xinyi Solar Holdings' earnings per share has shrunk at 17% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Xinyi Solar Holdings' Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Xinyi Solar Holdings that investors should take into consideration. Is Xinyi Solar Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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