Djerriwarrh Investments' (ASX:DJW) Upcoming Dividend Will Be Larger Than Last Year's

Djerriwarrh Investments Limited (ASX:DJW) will increase its dividend from last year's comparable payment on the 26th of August to A$0.07. Based on this payment, the dividend yield for the company will be 4.7%, which is fairly typical for the industry.

Check out our latest analysis for Djerriwarrh Investments

Djerriwarrh Investments' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Djerriwarrh Investments' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 143% 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.

Looking forward, could fall by 1.3% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 85%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of A$0.26 in 2012 to the most recent total annual payment of A$0.14. The dividend has shrunk at around 6.0% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Djerriwarrh Investments May Find It Hard To Grow The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Djerriwarrh Investments hasn't seen much change in its earnings per share over the last five years.

We should note that Djerriwarrh Investments has issued stock equal to 31% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Djerriwarrh Investments' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Djerriwarrh Investments will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Djerriwarrh Investments that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our 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 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.