Valhi (NYSE:VHI) Has Affirmed Its Dividend Of $0.08

The board of Valhi, Inc. (NYSE:VHI) has announced that it will pay a dividend of $0.08 per share on the 22nd of September. This means the annual payment will be 0.8% of the current stock price, which is lower than the industry average.

View our latest analysis for Valhi

Valhi's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Valhi's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 0.2% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 4.8%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was $2.00, compared to the most recent full-year payment of $0.32. This works out to a decline of approximately 84% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Valhi May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Valhi hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Valhi that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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