Greenbrier Companies (NYSE:GBX) Will Pay A Dividend Of US$0.27

The board of The Greenbrier Companies, Inc. (NYSE:GBX) has announced that it will pay a dividend of US$0.27 per share on the 17th of February. The dividend yield will be 2.6% based on this payment which is still above the industry average.

Check out our latest analysis for Greenbrier Companies

Greenbrier Companies' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Greenbrier Companies' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 49.6%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Greenbrier Companies Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the first annual payment was US$0.60, compared to the most recent full-year payment of US$1.08. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. Greenbrier Companies has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 19% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend 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. Case in point: We've spotted 3 warning signs for Greenbrier Companies (of which 2 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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