Mr D.I.Y. Group (M) Berhad (KLSE:MRDIY) Is Increasing Its Dividend To MYR0.015

The board of Mr D.I.Y. Group (M) Berhad (KLSE:MRDIY) has announced that it will be increasing its dividend by 25% on the 8th of September to MYR0.015, up from last year's comparable payment of MYR0.012. This makes the dividend yield about the same as the industry average at 3.2%.

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Mr D.I.Y. Group (M) Berhad's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, Mr D.I.Y. Group (M) Berhad was paying out 90% of earnings, but a comparatively small 52% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 28.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for Mr D.I.Y. Group (M) Berhad

Mr D.I.Y. Group (M) Berhad's Dividend Has Lacked Consistency

It's comforting to see that Mr D.I.Y. Group (M) Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2020, the annual payment back then was MYR0.0195, compared to the most recent full-year payment of MYR0.05. This means that it has been growing its distributions at 21% per annum 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's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mr D.I.Y. Group (M) Berhad hasn't seen much change in its earnings per share over the last five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Our Thoughts On Mr D.I.Y. Group (M) Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think Mr D.I.Y. Group (M) Berhad will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Mr D.I.Y. Group (M) Berhad is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Mr D.I.Y. Group (M) Berhad that investors should take into consideration. 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.