Australian United Investment (ASX:AUI) Goes Quarterly On Dividends Following The Move Is It Still Cheap

Australian United Investment (ASX:AUI) has shifted its dividend rhythm, moving from half-yearly distributions to a quarterly schedule. This change is backed by specific guidance on upcoming cash payments intended to create a more regular income stream.

Recent trading has been steady rather than dramatic for Australian United Investment, with a 90 day share price return of 4.58% and year to date share price return of 4.95% around the latest A$11.88 level. Over a longer horizon, total shareholder return of 8.01% over one year and 44.71% over five years points to gains that income investors may weigh alongside the new quarterly dividend schedule and the current discount to intrinsic value implied by the latest intrinsic discount figure.

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Australian United Investment has already delivered solid gains, and the new quarterly dividends sharpen its income appeal. The central puzzle now is simple: is most of the valuation upside already behind the stock or still ahead?

Price-to-earnings of 11.7x for Australian United Investment: Is it justified?

On straight earnings terms, Australian United Investment trades on a P/E of 11.7x, which is well below both the Australian market at 16.1x and the Australian Capital Markets industry at 19x. That gap puts a clear question in front of income focused holders weighing the new quarterly dividends against what looks like a cheaper valuation multiple.

The P/E ratio compares the share price to earnings per share and acts as a shorthand for how much investors are paying for each dollar of profit. For an investment company like Australian United Investment, that lens helps you see how the market is pricing its portfolio and fee structure relative to the capital markets peer group.

With a P/E meaningfully under the industry and peer averages of 19x, the market is paying less for Australian United Investment's recent earnings stream than it is for similar capital markets stocks. A 11.7x multiple against a higher sector benchmark is a strong relative discount, suggesting investors are either applying a cautious stance to the earnings quality, including the very large one off items flagged in the recent results, or assigning less value to future profit growth where there is currently insufficient forecast data.

Compared with the broader Australian market at 16.1x, the 11.7x P/E is also clearly lower, which points to a company priced below the average earnings multiple. This is despite having one year and five year total shareholder returns that are ahead of the market and its capital markets sector over those horizons. That spread can close in either direction over time. Yet right now it marks Australian United Investment as one of the cheaper P/E options within its local capital markets peer set.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-earnings of 11.7x (UNDERVALUED).

Still, the large one off items in recent earnings and the current discount to intrinsic value could both unwind if sentiment or portfolio performance changes.

Find out about the key risks to this Australian United Investment narrative.

Another view on Australian United Investment’s valuation

There is a sharp contrast once you shift from the earnings multiple to the SWS DCF model. On that measure, Australian United Investment at A$11.88 sits well above an estimated future cash flow value of A$0.61, which flags the stock as overvalued rather than cheap. So which lens do you trust more for income focused capital?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Australian United Investment for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 2 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed signals on Australian United Investment's value case. If you want to move quickly and decide where you stand, start by weighing its 2 key rewards and 3 important warning signs.

Looking for more investment ideas beyond Australian United Investment?

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