Houlihan Lokey (NYSE:HLI) Is Increasing Its Dividend To $0.55

Houlihan Lokey, Inc. (NYSE:HLI) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of September to $0.55. This takes the annual payment to 2.2% of the current stock price, which is about average for the industry.

View our latest analysis for Houlihan Lokey

Houlihan Lokey's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last dividend, Houlihan Lokey is earning enough to cover the payment, but then it makes up 178% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 54.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

Houlihan Lokey Doesn't Have A Long Payment History

Houlihan Lokey's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the dividend has gone from $0.60 total annually to $2.20. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

We Could See Houlihan Lokey's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Houlihan Lokey has impressed us by growing EPS at 6.3% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Houlihan Lokey's Dividend

Overall, we always like to see the dividend being raised, but we don't think Houlihan Lokey will make a great income stock. While Houlihan Lokey is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Houlihan Lokey that investors should take into consideration. Is Houlihan Lokey not quite the opportunity you were looking for? Why not check out our selection of top 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.