Harvey Norman Holdings (ASX:HVN) Has Affirmed Its Dividend Of AU$0.20

The board of Harvey Norman Holdings Limited (ASX:HVN) has announced that it will pay a dividend on the 2nd of May, with investors receiving AU$0.20 per share. Based on this payment, the dividend yield on the company's stock will be 6.7%, which is an attractive boost to shareholder returns.

See our latest analysis for Harvey Norman Holdings

Harvey Norman Holdings' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Harvey Norman Holdings was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to fall by 25.5%. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 76%, meaning that most of the company's earnings are being paid out to shareholders.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was AU$0.12 in 2012, and the most recent fiscal year payment was AU$0.30. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Harvey Norman Holdings has impressed us by growing EPS at 11% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Harvey Norman Holdings Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Harvey Norman Holdings might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Harvey Norman Holdings (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.