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board of directors Diversified United Investments Limited (ASX:DUI) has announced that it will pay a dividend on 15 March, with investors receiving A$0.07 per share. Based on this payment, the dividend yield is 3.2%, which is fairly typical for the industry.
Check out our latest analysis for Decentralized United Investments.
Decentralized United Investment’s income easily covers distributions
A stable dividend yield is great, but it’s only really useful if the payments are sustainable. Prior to this announcement, Diversified United Investment was paying out 88% of its revenue and over 75% of its free cash flow. This suggests that the company is more focused on returning cash to shareholders than growing its business, but it’s still within a reasonable range to continue.
If the company continues on its recent trajectory, EPS could expand by 1.2% over the next 12 months. If the dividend continues in line with recent trends, we expect the payout ratio could reach 88%. This is expensive, but still definitely achievable.
Decentralized United Investments has a proven track record
The company has a consistent track record of paying dividends with little volatility. Since 2014, the annual payment was then A$0.13 and the most recent annual payment was A$0.16. This means that the company increased its distribution at approximately 2.1% per year over that period. Dividend growth has been relatively slow and not significant, but some investors may value the relative stability of dividends.
Dividend increases may be difficult to achieve
Investors may be attracted to a stock based on the quality of its payment history. Diversified United Investment’s earnings per share have not changed much over the past five years. Diversified United Investment’s earnings per share have barely increased, which isn’t ideal. Perhaps this is why the company pays out a large portion of its profits to shareholders. If a company prefers to pay cash to shareholders rather than reinvest it, this can often say a lot about its dividend prospects.
Diversified United Investment’s philosophy on dividends
Overall, it’s great to see stable dividend payments, but we think the current payout levels may become unsustainable in the long term. Although it cannot be denied that the payments are very stable, I am a little worried that the dividend payout ratio is very high. You’ll probably look elsewhere for more profitable investments.
Investors generally prefer companies with consistent and stable dividend policies over companies with irregular dividend policies. On the other hand, despite the importance of dividends, they are not the only factor that our readers need to know when evaluating a company. You may also want to see if shareholders are aligned with insider interests by checking our visualization of insider shareholdings and trades in Diversified United Investment stock.Looking for more high-yield dividend ideas? Try ours A group of people with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
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