Australian United Investment (ASX:AUI) Has Announced A Dividend Of A$0.17

Australian United Investment Company Limited's (ASX:AUI) investors are due to receive a payment of A$0.17 per share on 21st of March. This means the dividend yield will be fairly typical at 3.5%.

See our latest analysis for Australian United Investment

Australian United Investment's Projections Indicate Future Payments May Be Unsustainable

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Australian United Investment's was paying out quite a large proportion of earnings and 90% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

EPS is set to fall by 1.9% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 115%, which is definitely a bit high to be sustainable going forward.

Australian United Investment Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from A$0.32 total annually to A$0.37. This means that it has been growing its distributions at 1.5% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Australian United Investment May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. However, Australian United Investment's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Australian United Investment is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Australian United Investment that you should be aware of before investing. Is Australian United Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.