Greenhill (NYSE:GHL) Has Announced That It Will Be Increasing Its Dividend To US$0.10

Greenhill & Co., Inc. (NYSE:GHL) will increase its dividend on the 16th of March to US$0.10. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Greenhill

Greenhill's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Greenhill was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 21.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 8.5%, 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

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from US$1.80 in 2012 to the most recent annual payment of US$0.40. Dividend payments have fallen sharply, down 78% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings have grown at around 4.5% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Greenhill could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Greenhill (of which 1 shouldn't be ignored!) you should know about. We have also put together a list of global stocks with a solid dividend.

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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.