Mr. DIY Group (M) Berhad (KLSE:MRDIY) will pay a dividend of RM0.01 on June 21st. The dividend yield based on this payment is 1.8%, which is a bit low compared to its peers.
Check out our latest analysis for Mr DIY Group (M) Berhad.
Mister DIY Group (M) Berhad's dividend is fully covered by profit
While yield is important, another factor to consider about a company's dividend is whether the company's current dividend levels are achievable. Prior to this announcement, Mr DIY Group (M) Berhad's dividend was comfortably covered by both cash flow and profit. This means that a large portion of the revenue is retained for business growth.
EPS is expected to increase by 36.1% next year. If dividends continue in line with recent trends, the dividend payout ratio is expected to be 22%, which is within a sufficiently satisfactory range for dividend sustainability.
Mister DIY Group (M) Berhad's dividend is inconsistent
Although the track record is not very long, the payments are already a little erratic. The total annual dividend paid was RM0.0195 in 2020, and the latest total annual payment was RM0.032. This works out to be a compound annual growth rate (CAGR) of approximately 13% over that period. Mr. DIY Group (M) Berhad has been increasing its distribution rapidly, despite having cut its dividend at least once in the past. Companies that have cut back often tend to cut back again, so be wary of buying this stock solely for the dividend income.
Limited growth potential through dividends
Earnings per share growth could be a mitigating factor, given historical dividend movements. Mr. DIY Group (M) Berhad's earnings per share have declined by 80% per year over the last five years. A significant decline in earnings per share doesn't bode well from a dividend perspective. Even conservative payout ratios can come under pressure if profits decline significantly. However, it's not all bad news. Revenues are expected to increase over the next 12 months. Until this becomes a long-term trend, we'll be a little cautious.
Thoughts on Mr DIY Group (M) Berhad's dividend
Overall, it's great to see stable dividend payments, but we think the current payout levels may become unsustainable in the long term. Payouts have been erratic in the past, but if the company generates enough cash to cover them, the dividend could be solid in the short term. I'd be a little wary of relying primarily on dividend income with this stock.
It's important to note that companies with a consistent dividend policy generate greater investor confidence than companies with an erratic dividend policy. At the same time, there are other factors that readers should be aware of before pouring capital into stocks. For example, we chose 1 warning sign for Mr DIY Group (M) Berhad Here's what investors should know before putting money into this stock. If you are a dividend investor, check out this article as well. A carefully selected list of high dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.