Stock Analysis

Diversified United Investment (ASX:DUI) Has Announced A Dividend Of AU$0.085

ASX:DUI
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Diversified United Investment Limited (ASX:DUI) will pay a dividend of AU$0.085 on the 23rd of September. Based on this payment, the dividend yield will be 3.0%, which is fairly typical for the industry.

Check out our latest analysis for Diversified United Investment

Diversified United Investment Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

If the company can't turn things around, EPS could fall by 6.3% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 139%, which is definitely a bit high to be sustainable going forward.

historic-dividend
ASX:DUI Historic Dividend August 20th 2021

Diversified United Investment Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from AU$0.13 to AU$0.15. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Over the past five years, it looks as though Diversified United Investment's EPS has declined at around 6.3% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

The Dividend Could Prove To Be Unreliable

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. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Diversified United Investment that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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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.
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