Shares of the Chinese e-commerce company JD.com (JD -4.71%) shook off a tough day of trading in the broader market and had risen roughly 4.4% as of 12:15 p.m. ET today after the company announced it may issue a special cash dividend.
JD.com in a regulatory filing said if its board of directors approves the special dividend, it will be adopted and declared around May 4.
The announcement seemed to catch the market off guard, although Citigroup analyst Alicia Yap wrote in a note to clients that the announcement shows confidence in JD.com's future and its potential future cash flow.
Yap in her research note told investors to remember that JD.com's board also raised its share repurchase plans from $2 billion to $3 billion at the end of 2021 and still has another $2.2 billion left in its authorization.
"Since buybacks are usually subject to trading window restrictions and may not see immediate effect, we believe the decision for a special cash dividend likely suggests JD's management and board are evaluating different ways to return value to shareholders, especially given the current uncertain macro environment," Yap wrote.
Yap has a $97 price target on JD.com, which implies about 83% upside from current levels. The stock is down significantly from early 2021, which is not uncommon among Chinese stocks listed on U.S. exchanges.
As a Chinese stock, JD.com is inherently riskier than U.S. stocks. The stock will also be impacted by the ability of regulators in Beijing and the U.S. to solve an ongoing auditing dispute that could determine whether many Chinese stocks are delisted from U.S. exchanges.
But if I had to pick a Chinese stock, I would definitely prefer a company like JD.com over many others, and do think the company has incredible potential.