Harrisons Holdings (Malaysia) Berhad (KLSE:HARISON) Is Paying Out A Dividend Of MYR0.50

The board of Harrisons Holdings (Malaysia) Berhad (KLSE:HARISON) has announced that it will pay a dividend of MYR0.50 per share on the 19th of August. The dividend yield will be 5.3% based on this payment which is still above the industry average.

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

Harrisons Holdings (Malaysia) Berhad's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite comfortably covered by Harrisons Holdings (Malaysia) Berhad's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS could expand by 24.9% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was MYR0.15, compared to the most recent full-year payment of MYR0.50. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Harrisons Holdings (Malaysia) Berhad has grown earnings per share at 25% per year over the past five years. Harrisons Holdings (Malaysia) Berhad is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Harrisons Holdings (Malaysia) Berhad is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Harrisons Holdings (Malaysia) Berhad is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Harrisons Holdings (Malaysia) Berhad that investors should take into consideration. 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.