LexinFintech Holdings' (NASDAQ:LX) Dividend Will Be CN¥0.0634

The board of LexinFintech Holdings Ltd. (NASDAQ:LX) has announced that it will pay a dividend of CN¥0.0634 per share on the 18th of October. However, the dividend yield of 7.6% is still a decent boost to shareholder returns.

Check out our latest analysis for LexinFintech Holdings

LexinFintech Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, LexinFintech Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 93.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 1.3% by next year, which is in a pretty sustainable range.

LexinFintech Holdings Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though LexinFintech Holdings' EPS has declined at around 17% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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.

Our Thoughts On LexinFintech Holdings' Dividend

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for LexinFintech Holdings that investors should take into consideration. Is LexinFintech Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.