board of directors Mr. DIY Group (M) Berhad (KLSE:MRDIY) announced that it will increase its dividend to RM0.01 on March 22. This is a 67% increase from his RM0.006 payout last year covering the same period. Despite this increase, the dividend yield is 2.0%, representing only a small increase in shareholder return.
Check out our latest analysis for Mr DIY Group (M) Berhad.
Mister DIY Group (M) Berhad's dividend is fully covered by profit
Although the dividend yield is a bit low, sustainability of payments is also an important part of evaluating income stocks. The last dividend was easily covered by DIY Group (M) Berhad's profits. This means that a large portion of the revenue is retained for business growth.
Next year, EPS is expected to increase by 47.1%. If the dividend continues at this rate, the payout ratio could be 19% by next year, which we think is quite sustainable going forward.
Mister DIY Group (M) Berhad's dividend is inconsistent
Although the track record is not very long, the payments are already a little erratic. From 2021 onwards, his annual payment at the time was RM0.0195, while his recent annual payment was RM0.032. This works out to be a compound annual growth rate (CAGR) of approximately 18% over that period. While it's great to see dividends grow significantly, we're concerned about a cut in dividends, as it could indicate that the company's dividend policy is too ambitious.
Limited growth potential through dividends
Given that the dividend has been cut in the past, we need to see if earnings are growing, and if that could lead to dividend increases in the future. Over the past 5 years, Mr DIY Group (M) Berhad's EPS appears to have decreased by around 80% per year. This sharp decline could indicate that the business is going through tough times, potentially constraining its ability to pay larger dividends each year going forward. But things are actually looking up next year, with revenues set to increase. Wait until it becomes a pattern before you get too excited.
In summary
In summary, it's always good to see a dividend increase, but we don't think DIY Group (M) Berhad's payout is rock solid. The payouts aren't particularly stable, and we don't see much growth potential, but the dividend is well covered by cash flow, so it could prove reliable in the short term. Overall, I don't think this company has the makings of a high-yield stock.
Companies with stable dividend policies are likely to enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things investors should consider when analyzing stock performance. For example, we identified 1 warning sign for Mr DIY Group (M) Berhad What you need to know before investing.Looking for more high-yield dividend ideas? Try ours A group of people with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, 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.