Dalrymple Bay Infrastructure's (ASX:DBI) Dividend Will Be Increased To A$0.0538

Dalrymple Bay Infrastructure Limited (ASX:DBI) will increase its dividend on the 13th of June to A$0.0538, which is 7.0% higher than last year's payment from the same period of A$0.0503. This takes the dividend yield to 7.3%, which shareholders will be pleased with.

Check out our latest analysis for Dalrymple Bay Infrastructure

Dalrymple Bay Infrastructure Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 139% of what it was earning and 78% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Earnings per share is forecast to rise by 36.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 111%, which probably can't continue without putting some pressure on the balance sheet.

historic-dividend

Dalrymple Bay Infrastructure Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of A$0.18 in 2021 to the most recent total annual payment of A$0.215. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. Dalrymple Bay Infrastructure has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Dalrymple Bay Infrastructure has impressed us by growing EPS at 133% per year over the past three years. Although earnings per share is up nicely Dalrymple Bay Infrastructure is paying out 139% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Dalrymple Bay Infrastructure's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Dalrymple Bay Infrastructure you should be aware of, and 1 of them is a bit unpleasant. 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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