DIVERSIFIED UNITED INVESTMENTS LIMITED (ASX:DUI) has announced that it is increasing its periodic dividend to A$0.09 on September 9, which will be 5.9% higher than last year’s comparable payout amount of A$0.085. It carries an annual payout of 3.3% of the current stock price, which is average for the industry.
Check out our latest analysis for Diversified United Investments
Diversified United Investments is covered by dividend income
We want to see a healthy dividend yield, but it’s only useful to us if the payouts can continue. Before this announcement, Diversified United Investments was paying out 74% of earnings, but a relatively small 63% of free cash flow. Since dividends are only paying out cash to shareholders, we care more about the cash payout ratio, which shows that there is plenty left over for reinvestment in the business.
If the trend of the past few years continues, EPS will increase by 6.4 percent in the next 12 months. Assuming dividends continue on recent trends, we think the payout ratio could be 72% by next year, which is in a pretty sustainable range.
Diversified United Investments has a solid track record
The company’s distribution has remained remarkably stable even over its long history of dividend payments. The annual payout over the last 10 years was A$0.13 in 2012, and the most recent financial year payout was A$0.16. This means that its distribution is growing at 2.1% per year during that time. Although we cannot deny that dividends have been remarkably stable in the past, growth has been much more muted.
Increase in dividend is likely
Investors who have held shares in the company for the past few years will be satisfied with the dividends they have received. Diversified United Investments has impressed us by growing EPS by 6.4% annually over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with a high-end payout ratio we don’t think there is much potential for dividend growth.
We really like Diversified United Investments’ dividend
In summary, seeing this dividend increase is always positive, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Overall, it checks many of the boxes we look for when choosing an income stock.
Investors generally favor companies with a consistent, stable dividend policy as opposed to those that operate erratically. Still, investors need to consider many factors other than dividend payouts when analyzing a company. Now, if you want to take a closer look, it will be worth checking out ours for free Research on Diversified Joint Ventures Management Tenure, salary, and performance. Looking for more high yield dividend ideas? Try ours A 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 using only 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 into account 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 content. Simply Wall St. has no position in any of the stocks mentioned.
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