Qifu Technology, Inc.'s (NASDAQ:QFIN) dividend will be increasing from last year's payment of the same period to CN¥0.69 on 2nd of June. This takes the dividend yield to 3.1%, which shareholders will be pleased with.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Qifu Technology's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Qifu Technology'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.

Looking forward, earnings per share is forecast to rise by 44.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.1% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Qifu Technology

Qifu Technology's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 3 years was CN¥7.07 in 2022, and the most recent fiscal year payment was CN¥10.12. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Qifu Technology has impressed us by growing EPS at 18% per year over the past five years. Qifu Technology definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Qifu Technology's Dividend

Overall, a dividend increase is always good, and we think that Qifu Technology is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've picked out 1 warning sign for Qifu Technology that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.