FinVolution Group's (NYSE:FINV) Upcoming Dividend Will Be Larger Than Last Year's
FinVolution Group (NYSE:FINV) has announced that it will be increasing 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 4.2%, providing a nice boost to shareholder returns.
View our latest analysis for FinVolution Group
FinVolution Group's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.
The next year is set to see EPS grow by 43.1%. If the dividend continues on this path, the payout ratio could be 1.9% by next year, which we think can be pretty sustainable going forward.
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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the dividend has gone from CN¥1.27 total annually to CN¥1.48. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, FinVolution Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for FinVolution Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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