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The board of LexinFintech Holdings Ltd. (NASDAQ:LX) has announced that it will be paying its dividend of CN¥0.088 on the 16th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 1.6% of the current stock price, which is about 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 LexinFintech Holdings' stock price has increased by 80% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
LexinFintech Holdings' Projected Earnings Seem Likely To Cover Future Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, LexinFintech Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 0.7%, which we would be comfortable to see continuing.
Check out our latest analysis for LexinFintech Holdings
LexinFintech Holdings' Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2023, the dividend has gone from CN¥1.66 total annually to CN¥1.32. Dividend payments have fallen sharply, down 21% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth Potential Is Shaky
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though LexinFintech Holdings' EPS has declined at around 12% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.