Dalrymple Bay Infrastructure Limited (ASX:DBI) has announced that it will be increasing its periodic dividend on the 20th of December to A$0.0563, which will be 4.7% higher than last year's comparable payment amount of A$0.0537. This will take the annual payment to 6.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Dalrymple Bay Infrastructure

Estimates Indicate Dalrymple Bay Infrastructure's Could Struggle to Maintain Dividend Payments In The Future

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was higher than its profits, and made up 76% 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 31.9% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 111% over the next year.

Dalrymple Bay Infrastructure Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the dividend has gone from A$0.18 total annually to A$0.215. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

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 seen EPS rising for the last three years, at 128% per annum. EPS has been growing well, but Dalrymple Bay Infrastructure has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Dalrymple Bay Infrastructure's payments are rock solid. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Dalrymple Bay Infrastructure has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Dalrymple Bay Infrastructure not quite the opportunity you were looking for? Why not check out our selection of top 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.