Homeritz Corporation Berhad (KLSE:HOMERIZ) will increase its dividend on the 10th of March to MYR0.01, which is 67% higher than last year's payment from the same period of MYR0.006. This makes the dividend yield about the same as the industry average at 3.7%.

Check out our latest analysis for Homeritz Corporation Berhad

Homeritz Corporation Berhad's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Homeritz Corporation Berhad's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 31.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 27%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.016 in 2013, and the most recent fiscal year payment was MYR0.02. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Homeritz Corporation Berhad May Find It Hard To Grow The Dividend

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. Homeritz Corporation Berhad hasn't seen much change in its earnings per share over the last five years. If Homeritz Corporation Berhad is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We should note that Homeritz Corporation Berhad has issued stock equal to 12% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 example, we've identified 4 warning signs for Homeritz Corporation Berhad (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.