Houlihan Lokey (NYSE:HLI) Is Increasing Its Dividend To $0.57

Houlihan Lokey, Inc. (NYSE:HLI) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of June to $0.57. Despite this raise, the dividend yield of 1.7% is only a modest boost to shareholder returns.

Check out our latest analysis for Houlihan Lokey

Houlihan Lokey's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Houlihan Lokey's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 49.2% over the next year. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Houlihan Lokey Is Still Building Its Track Record

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. The dividend has gone from an annual total of $0.60 in 2015 to the most recent total annual payment of $2.28. This means that it has been growing its distributions at 16% per annum over that time. 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.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Houlihan Lokey has grown earnings per share at 9.8% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Houlihan Lokey Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Houlihan Lokey is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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.