The board of Reunert Limited (JSE:RLO) has announced that it will be paying its dividend of ZAR2.76 on the 27th of January, an increased payment from last year’s comparable dividend. This takes the dividend yield to 5.0%, which shareholders will be pleased with.

View our latest analysis for Reunert

A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Based on the last payment, Reunert was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 47.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ZAR3.70 in 2015, and the most recent fiscal year payment was ZAR3.66. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn’t what we are looking for.

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Reunert has impressed us by growing EPS at 6.1% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Overall, it’s great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn’t translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we’ve identified 1 warning sign for Reunert that you should be aware of before investing. 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.