Diversified United Investment Limited (ASX:DUI) has announced it will increase its periodic dividend on September 9 to A$0.09, which will be 5.9% higher than last year’s comparable payout of A$0.085. This increases the annual payout to 3.3% of the current share price, which is about average for the industry.
See our latest analysis on diversified pooled investments
Diversified United Investment’s dividend is well covered by earnings
We want to see a steady dividend yield, but that’s only good for us if the payment can continue. Prior to this announcement, Diversified United Investment was paying out 74% of income but a relatively small 63% of free cash flow. Since a dividend is simply a payment of cash to shareholders, we are more interested in the cash payout ratio, from which we see that there is plenty left to reinvest in the business.
If the trend of the past few years continues, EPS will grow by 6.4% over the next 12 months. Assuming the dividend continues on recent trends, we think the payout ratio could be 72% by next year, which is in a fairly sustainable range.
Diversified United Investment has a solid track record
Even over its long history of paying dividends, the company’s distributions have been remarkably stable. The annual payment over the past 10 years was AUD$0.13 in 2012 and the most recent fiscal year payment was AUD$0.16. That means he has increased his distributions by 2.1% per year during that time. While we can’t deny that the dividend has been remarkably stable in the past, growth has been quite muted.
The dividend has growth potential
Investors who have held shares in the company over the past few years will be pleased with the dividend income they have received. Diversified United Investment has impressed us with EPS growth of 6.4% per year over the past five years. The company has been able to grow earnings at a decent rate recently, but with the payout ratio on the higher end, we don’t think the dividend has much growth potential.
We really like Diversified United Investment’s dividend
In summary, it is always positive to see the dividend increase and we are particularly pleased with its overall sustainability. Profits easily cover distributions and the company generates a lot of cash. Overall, this checks many of the boxes we look for when picking a profitable stock.
Investors generally tend to prefer companies with consistent, stable dividend policies, as opposed to those that perform erratically. Still, investors should consider a host of other factors besides dividend payouts when analyzing a company. Now, if you want a closer look, it’s worth checking out ours Free of charge research on Diversified Pooled Investments term of office, salary and performance. Looking for more high yield dividend ideas? Try ours a collection of strong dividend payers.
Have feedback on this article? Concerned about content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts, using only an unbiased methodology, and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. We aim to provide you with long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
Join a paid user research session
You will receive a $30 Amazon Gift Card for 1 hour of your time while helping us build better investing tools for individual investors like you. Register here