Australian United Investment (ASX:AUI) Is Due To Pay A Dividend Of A$0.20

Australian United Investment Company Limited (ASX:AUI) has announced that it will pay a dividend of A$0.20 per share on the 19th of September. This payment means that the dividend yield will be 3.8%, which is around the industry average.

See our latest analysis for Australian United Investment

Australian United Investment's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Australian United Investment's was paying out quite a large proportion of earnings and 83% 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 grow by 3.0% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 82%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Australian United Investment Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was A$0.295, compared to the most recent full-year payment of A$0.37. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 3.0% a year for the past five years, which isn't massive but still better than seeing them shrink. Australian United Investment's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

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. See if management have their own wealth at stake, by checking insider shareholdings in Australian United Investment stock. 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.