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.
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.
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.
What are the risks and opportunities for Greenhill?
Revenue is forecast to grow 11.91% per year
Debt is not well covered by operating cash flow
Shareholders have been diluted in the past year
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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.
Greenhill & Co., Inc., an independent investment bank, provides financial and strategic advisory services to corporations, partnerships, institutional investors, and governments worldwide.
Slightly overvalued unattractive dividend payer.