29-03-2025
LexinFintech Holdings (NASDAQ:LX) Is Paying Out A Larger Dividend Than Last Year
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.
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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
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.
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.
In summary, while it's always good to see the dividend being raised, we don't think LexinFintech Holdings' payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for LexinFintech Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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