Diamond Hill Investment Group (NASDAQ:DHIL) Has Affirmed Its Dividend Of $1.50

The board of Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) has announced that it will pay a dividend of $1.50 per share on the 16th of June. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.

View our latest analysis for Diamond Hill Investment Group

Diamond Hill Investment Group's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Diamond Hill Investment Group was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Unless the company can turn things around, EPS could fall by 0.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 69%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was $5.00, compared to the most recent full-year payment of $10.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Diamond Hill Investment Group might have put its house in order since then, but we remain cautious.

Diamond Hill Investment Group May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Diamond Hill Investment Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Diamond Hill Investment Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Diamond Hill Investment Group's payments, as there could be some issues with sustaining them into the future. While Diamond Hill Investment Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

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 1 warning sign for Diamond Hill Investment Group 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.