Harrisons Holdings (Malaysia) Berhad (KLSE:HARISON) Is Increasing Its Dividend To MYR0.50

Harrisons Holdings (Malaysia) Berhad's (KLSE:HARISON) dividend will be increasing from last year's payment of the same period to MYR0.50 on 18th of August. This makes the dividend yield 5.2%, which is above the industry average.

Check out our latest analysis for Harrisons Holdings (Malaysia) Berhad

Harrisons Holdings (Malaysia) Berhad's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Harrisons Holdings (Malaysia) Berhad was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share could rise by 25.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from MYR0.15 total annually to MYR0.50. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Harrisons Holdings (Malaysia) Berhad has been growing its earnings per share at 25% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Harrisons Holdings (Malaysia) Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Harrisons Holdings (Malaysia) Berhad's payments are rock solid. While Harrisons Holdings (Malaysia) Berhad is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Harrisons Holdings (Malaysia) Berhad (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.