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Xinyuan Real Estate Co., Ltd. Message Board

  • doublej7844 doublej7844 Aug 15, 2012 11:08 AM Flag

    Question about the dividend

    If XIN buys back it own shares, seems as if the cost of the dividend to the company goes down. Does the company pay itself the dividend on the shares repurchased? Does this go to retained earnings?

    If the share count reduction continues, the dividend keeps getting less and less expensive for the company and, therefore, there is no reason why they wouldn't substantially increase the dividend next year, then announce another buyback. With this logic we may get to a $.10 quarterly dividend in about 2-3 years. Seems plausible.

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    • Although the company may elect not to retire the bought back shares but simply hold them as treasury stock, these shares are excluded from the outstanding shares count and do not pay a dividend.

      • 1 Reply to staccani
      • So if they are excluded from the outstanding shares, and do not pay a dividend, the actual "cost" of the dividend continues to decrease as they buy more shares (I think this point was made a while back by JB). So, where I'm going with this is: is it reasonable to assume that increases to the dividend should continue to be substantial (not just a penny per year, but 1 or 2 cents per quarter starting next year) because the company should continue to grow and the cost of the dividend (because of fewer outstanding shares) will be lower.

        The reason I am bringing this up is because I was thinking the other day, how even if this stock doesn't move over the next 5 years, I still make $4000 (800 annually) in dividend payments. But if they increase the dividend substantially over this time frame, that payment keeps increasing too. If hmmmm is arguing a $.10 per quarter dividend would do wonders for this stock, we might actually get there in a few years. Then my $800 annually gets to $2200, annually, plus imagine the share price increase. Now I'm thinking 2-3 years out I might double my investment AND be getting $1500/year in dividends. If so, I still don't think I would sell this stock.

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