HRnetGroup Limited (SGX:CHZ) is reducing its dividend to SGD0.0187 on the 11th of Septemberwhich is 12% less than last year's comparable payment of SGD0.0213. The yield is still above the industry average at 5.0%.
View our latest analysis for HRnetGroup
HRnetGroup'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. Based on the last payment, HRnetGroup was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to expand by 2.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 66%, which is in the range that makes us comfortable with the sustainability of the dividend.
HRnetGroup Doesn't Have A Long Payment History
HRnetGroup's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the dividend has gone from SGD0.023 total annually to SGD0.0374. This means that it has been growing its distributions at 10% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that HRnetGroup's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. The company has been growing at a pretty soft 1.4% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On HRnetGroup's Dividend
Even though the dividend was cut this year, we think HRnetGroup has the ability to make consistent payments in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for HRnetGroup (of which 1 is potentially serious!) you should know about. Is HRnetGroup not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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