Greenbrier Companies (NYSE:GBX) Has Affirmed Its Dividend Of $0.27

The Greenbrier Companies, Inc. (NYSE:GBX) has announced that it will pay a dividend of $0.27 per share on the 16th of May. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.

See our latest analysis for Greenbrier Companies

Greenbrier Companies Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Greenbrier Companies was paying out 182% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Earnings per share is forecast to rise by 58.1% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 121%, which is a bit high and could start applying pressure to the balance sheet.

Greenbrier Companies Doesn't Have A Long Payment History

It is great to see that Greenbrier Companies has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the dividend has gone from $0.60 total annually to $1.08. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. Greenbrier Companies 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 Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Greenbrier Companies' EPS has declined at around 32% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

We're Not Big Fans Of Greenbrier Companies' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Greenbrier Companies make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Greenbrier Companies you should be aware of, and 3 of them can't be ignored. Is Greenbrier Companies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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