Australian United Investment (ASX:AUI) Will Pay A Dividend Of AU$0.17

Australian United Investment Company Limited (ASX:AUI) has announced that it will pay a dividend of AU$0.17 per share on the 18th of March. Based on this payment, the dividend yield will be 3.7%, which is fairly typical for the industry.

View our latest analysis for Australian United Investment

Australian United Investment's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. At the time of the last dividend payment, Australian United Investment was paying out a very large proportion of what it was earning and 96% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 5.2% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

Australian United Investment Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from AU$0.27 in 2012 to the most recent annual payment of AU$0.36. This implies that the company grew its distributions at a yearly rate of about 3.1% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See Australian United Investment's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see Australian United Investment has been growing its earnings per share at 5.2% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. 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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