Don't Race Out To Buy Diversified United Investment Limited (ASX:DUI) Just Because It's Going Ex-Dividend

Diversified United Investment Limited (ASX:DUI) stock is about to trade ex-dividend in two days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Diversified United Investment's shares before the 26th of August in order to receive the dividend, which the company will pay on the 17th of September.

The company's next dividend payment will be AU$0.09 per share, and in the last 12 months, the company paid a total of AU$0.16 per share. Last year's total dividend payments show that Diversified United Investment has a trailing yield of 3.0% on the current share price of AU$5.34. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Diversified United Investment has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Diversified United Investment

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Diversified United Investment paid out 96% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

Click here to see how much of its profit Diversified United Investment paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Diversified United Investment's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Diversified United Investment has delivered an average of 1.3% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Is Diversified United Investment an attractive dividend stock, or better left on the shelf? Diversified United Investment has an uncomfortably high payout ratio, and its earnings have not grown at all. Diversified United Investment doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Diversified United Investment don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 1 warning sign for Diversified United Investment you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.