LexinFintech Holdings (NASDAQ:LX) Boosts Dividend: A Closer Look

In the ever-evolving world of finance, dividends are the lifeblood of income-focused investors. LexinFintech Holdings Ltd. (NASDAQ:LX), a leading technology-empowered personal financial service enabler in China, has recently announced a significant increase in its dividend payout. The board has declared a dividend of CN¥0.088 per share, payable on May 16, 2025. This marks a notable increase from last year's comparable dividend and takes the annual payment to 1.6% of the current stock price, which is about average for the industry. But what does this mean for investors, and should you be jumping on the bandwagon?

First, let's dive into the numbers. LexinFintech Holdings' stock price has surged by 80% in the last three months, which is a fantastic return for shareholders. However, this significant increase in stock price can also explain the decrease in the dividend yield. While the dividend yield is important for income investors, it is also crucial to consider any large share price moves, as this will generally outweigh any gains from distributions.

The recent increase in the dividend payout is a positive sign for shareholders, indicating that the company is generating sufficient earnings to support this distribution. For the fourth quarter of 2024, net income was RMB363 million, representing an increase of about 17% quarter-over-quarter, marking the fourth consecutive quarter of improved profitability. The company's focus on asset quality and profitability enhancement has contributed to this sustainable profit growth.

However, it is essential to note that LexinFintech Holdings' dividend has lacked consistency in the past. Since 2023, the dividend has decreased from CN¥1.66 total annually to CN¥1.32, marking a 21% decline. This instability in dividend payments can degrade shareholders' returns and indicate that the company may be running into problems. Additionally, the company's earnings per share (EPS) have declined at around 12% a year over the past five years, which can constrain dividend payments if the trend continues into the future.



Despite these concerns, earnings are predicted to gain some ground over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 0.7%, which would be a comfortable level to see continuing. Analysts expect a massive rise in earnings per share in the next year, which could support the increased dividend payout.

In conclusion, while the increased dividend payout is a positive sign for shareholders, it is essential to monitor the company's financial health and growth prospects closely. The company's recent stock price performance and earnings per share trends suggest that it has the potential to sustain the increased dividend payout. However, the lack of consistency in dividend payments and the decline in EPS over the past five years are potential concerns that investors should be aware of.

As always, do your own research and consider your risk tolerance before making any investment decisions. Happy investing!