Yixin Group Limited (HKG:2858) has announced that it will be increasing its periodic dividend on the 26th of June to CN¥0.13, which will be 333% higher than last year's comparable payment amount of CN¥0.03. Even though the dividend went up, the yield is still quite low at only 2.5%.

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 Yixin Group's stock price has increased by 73% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Yixin Group

Yixin Group's Projections Indicate Future Payments May Be Unsustainable

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Yixin Group's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 56.0%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Yixin Group Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2023, the annual payment back then was CN¥0.0169, compared to the most recent full-year payment of CN¥0.027. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Yixin Group has impressed us by growing EPS at 89% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Yixin Group (1 is concerning!) 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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