Granite Construction's (NYSE:GVA) Dividend Will Be US$0.13

The board of Granite Construction Incorporated (NYSE:GVA) has announced that it will pay a dividend on the 15th of July, with investors receiving US$0.13 per share. This means the annual payment is 1.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Granite Construction

Granite Construction Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. While Granite Construction is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Recent, EPS has fallen by 65.9%, so this could continue over the next year. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

Granite Construction Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The most recent annual payment of US$0.52 is about the same as the first annual payment 10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

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. However, initial appearances might be deceiving. Over the past five years, it looks as though Granite Construction's EPS has declined at around 66% 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Granite Construction that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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