Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) Looks Interesting, And It's About To Pay A Dividend

By
Simply Wall St
Published
May 28, 2021
NasdaqGS:DHIL
Source: Shutterstock

Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Diamond Hill Investment Group's shares on or after the 2nd of June will not receive the dividend, which will be paid on the 18th of June.

The company's next dividend payment will be US$1.00 per share. Last year, in total, the company distributed US$16.00 to shareholders. Based on the last year's worth of payments, Diamond Hill Investment Group stock has a trailing yield of around 9.1% on the current share price of $175.41. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Diamond Hill Investment Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Diamond Hill Investment Group is paying out just 6.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Diamond Hill Investment Group paid out over the last 12 months.

historic-dividend
NasdaqGS:DHIL Historic Dividend May 29th 2021

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Diamond Hill Investment Group earnings per share are up 7.1% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Diamond Hill Investment Group has lifted its dividend by approximately 4.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Diamond Hill Investment Group for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Diamond Hill Investment Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Diamond Hill Investment Group for the dividends alone, you should always be mindful of the risks involved. For example, we've found 4 warning signs for Diamond Hill Investment Group (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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