FinVolution Group (NYSE:FINV) Has Announced That It Will Be Increasing Its Dividend To CN¥0.217

FinVolution Group (NYSE:FINV) will increase its dividend from last year's comparable payment on the 7th of May to CN¥0.217. This will take the dividend yield to an attractive 4.1%, providing a nice boost to shareholder returns.

See our latest analysis for FinVolution Group

FinVolution Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, FinVolution Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 43.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 1.9% by next year, which is in a pretty sustainable range.

FinVolution Group's Dividend Has Lacked Consistency

It's comforting to see that FinVolution Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was CN¥1.27, compared to the most recent full-year payment of CN¥1.48. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

FinVolution Group May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, FinVolution Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, FinVolution Group has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for FinVolution Group that you should be aware of before investing. 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.