Djerriwarrh Investments Limited's (ASX:DJW) dividend will be increasing from last year's payment of the same period to A$0.07 on 26th of August. The payment will take the dividend yield to 4.8%, which is in line with the average for the industry.

Check out our latest analysis for Djerriwarrh Investments

Djerriwarrh Investments' Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

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. historic-dividend

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was A$0.26 in 2012, and the most recent fiscal year payment was A$0.14. This works out to be a decline of approximately 6.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Djerriwarrh Investments May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Unfortunately, Djerriwarrh Investments' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

An additional note is that the company has been raising capital by issuing stock equal to 31% of shares outstanding in the last 12 months. 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. While Djerriwarrh Investments is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Djerriwarrh Investments that you should be aware of before investing. 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.

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