The board of HRnetGroup Limited (SGX:CHZ) has announced that it will be increasing its dividend by 14% on the 24th of May to SGD0.0213, up from last year's comparable payment of SGD0.0187. This takes the dividend yield to 5.6%, which shareholders will be pleased with.

View our latest analysis for HRnetGroup

HRnetGroup's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by HRnetGroup's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 3.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 72%, which is comfortable for the company to continue in the future.

HRnetGroup Is Still Building Its Track Record

It is great to see that HRnetGroup has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the annual payment back then was SGD0.023, compared to the most recent full-year payment of SGD0.04. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider HRnetGroup to be a consistent dividend paying stock.

We Could See HRnetGroup's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that HRnetGroup has grown earnings per share at 6.3% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for HRnetGroup (1 doesn't sit too well with us!) that you should be aware of before investing. Is HRnetGroup not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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