Graham Holdings (NYSE:GHC) Is Paying Out A Larger Dividend Than Last Year

Graham Holdings Company (NYSE:GHC) will increase its dividend on the 16th of February to $1.65, which is 4.4% higher than last year's payment from the same period of $1.58. Even though the dividend went up, the yield is still quite low at only 1.0%.

See our latest analysis for Graham Holdings

Graham Holdings' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Graham Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 6.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was $9.80, compared to the most recent full-year payment of $6.32. This works out to be a decline of approximately 4.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Graham Holdings Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Graham Holdings has grown earnings per share at 6.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Graham Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On Graham Holdings' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. For instance, we've picked out 2 warning signs for Graham Holdings that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.