Greenhill (NYSE:GHL) Could Be A Buy For Its Upcoming Dividend

By
Simply Wall St
Published
February 24, 2022
NYSE:GHL
Source: Shutterstock

Greenhill & Co., Inc. (NYSE:GHL) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Greenhill's shares before the 1st of March in order to be eligible for the dividend, which will be paid on the 16th of March.

The company's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Based on the last year's worth of payments, Greenhill has a trailing yield of 2.3% on the current stock price of $17.58. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Greenhill has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Greenhill

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Greenhill has a low and conservative payout ratio of just 9.0% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:GHL Historic Dividend February 24th 2022

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Greenhill earnings per share are up 4.5% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Greenhill has seen its dividend decline 14% per annum on average over the past 10 years, which is not great to see. Greenhill is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Greenhill an attractive dividend stock, or better left on the shelf? Greenhill has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Greenhill looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks Greenhill is facing. Case in point: We've spotted 3 warning signs for Greenhill you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.