FinVolution Group (NYSE:FINV) Is Increasing Its Dividend To CN¥0.257

The board of FinVolution Group (NYSE:FINV) has announced that it will be paying its dividend of CN¥0.257 on the 7th of May, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 2.1%, which is in line with the 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 FinVolution Group's stock price has increased by 40% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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FinVolution Group's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, FinVolution Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 59.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 1.8% by next year, which is in a pretty sustainable range.

See our latest analysis for FinVolution Group

FinVolution Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from CN¥1.27 total annually to CN¥1.48. This means that it has been growing its distributions at 2.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, FinVolution Group has only grown its earnings per share at 3.4% per annum over the past five years. If FinVolution Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for FinVolution Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.