Diversified United Investment (ASX:DUI) Is Paying Out A Dividend Of A$0.09

The board of Diversified United Investment Limited (ASX:DUI) has announced that it will pay a dividend on the 19th of September, with investors receiving A$0.09 per share. This payment means the dividend yield will be 3.3%, which is below the average for the industry.

See our latest analysis for Diversified United Investment

Diversified United Investment's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend made up a very large portion of earnings and also represented 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 3.6% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 80%, which is on the higher side, but certainly still feasible.

Diversified 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. The dividend has gone from an annual total of A$0.13 in 2013 to the most recent total annual payment of A$0.16. This means that it has been growing its distributions at 2.1% per annum 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 May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.6% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

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. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Diversified United Investment in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high yield 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.