Stock Analysis

Granite Construction (NYSE:GVA) Has Affirmed Its Dividend Of $0.13

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NYSE:GVA
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Granite Construction Incorporated (NYSE:GVA) has announced that it will pay a dividend of $0.13 per share on the 14th of October. Based on this payment, the dividend yield on the company's stock will be 1.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Granite Construction

Granite Construction's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 17% which is fairly sustainable.

historic-dividend
NYSE:GVA Historic Dividend September 19th 2022

Granite Construction Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. There hasn't been much of a change in the dividend over the last 10 years. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Earnings per share has been sinking by 19% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Granite Construction's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

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 3 warning signs for Granite Construction you should be aware of, and 2 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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About NYSE:GVA

Granite Construction

Granite Construction Incorporated operates as an infrastructure contractor and a construction materials producer in the United States.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth5
Past Performance1
Financial Health4
Dividends2

Read more about these checks in the individual report sections or in our analysis model.

High growth potential and good value.