Mr D.I.Y. Group (M) Berhad's (KLSE:MRDIY) Upcoming Dividend Will Be Larger Than Last Year's

The board of Mr D.I.Y. Group (M) Berhad (KLSE:MRDIY) has announced that it will be paying its dividend of MYR0.018 on the 28th of March, an increased payment from last year's comparable dividend. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.

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

Mr D.I.Y. Group (M) Berhad's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Mr D.I.Y. Group (M) Berhad's dividend made up quite a large proportion of earnings but only 60% 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.

Over the next year, EPS is forecast to expand by 34.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 30% which would be quite comfortable going to take the dividend forward.

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

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was MYR0.0195 in 2021, and the most recent fiscal year payment was MYR0.05. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. 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.

Mr D.I.Y. Group (M) Berhad Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Mr D.I.Y. Group (M) Berhad has been growing its earnings per share at 12% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Mr D.I.Y. Group (M) Berhad that investors should know about before committing capital to this stock. 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.