Australian United Investment's (ASX:AUI) Upcoming Dividend Will Be Larger Than Last Year's

The board of Australian United Investment Company Limited (ASX:AUI) has announced that it will be paying its dividend of A$0.20 on the 9th of September, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.7%, which is in line with the average for the industry.

Check out our latest analysis for Australian United Investment

Australian United Investment's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite comfortably covered by Australian United Investment's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share could rise by 10.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

Australian United Investment Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was A$0.275, 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 3.0% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Australian United Investment has seen EPS rising for the last five years, at 10.0% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Australian United Investment's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in Australian United Investment stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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