360 DigiTech's (NASDAQ:QFIN) Dividend Will Be Reduced To CN¥0.15

360 DigiTech, Inc. (NASDAQ:QFIN) has announced that on 18th of January, it will be paying a dividend ofCN¥0.15, which a reduction from last year's comparable dividend. However, the dividend yield of 4.5% is still a decent boost to shareholder returns.

Check out the opportunities and risks within the US Consumer Finance industry.

360 DigiTech's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, 360 DigiTech's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 83.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 1.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

360 DigiTech Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. 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 Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that 360 DigiTech has been growing its earnings per share at 77% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like 360 DigiTech's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like 360 DigiTech does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for 360 DigiTech that you should be aware of before investing. Is 360 DigiTech 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.