Readers hoping to buy Greenhill & Co., Inc. (NYSE:GHL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 3rd of March in order to be eligible for this dividend, which will be paid on the 18th of March.
Greenhill's next dividend payment will be US$0.05 per share. Last year, in total, the company distributed US$0.20 to shareholders. Based on the last year's worth of payments, Greenhill stock has a trailing yield of around 1.3% on the current share price of $15.76. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! 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 usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Greenhill paying out a modest 44% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Greenhill's earnings per share have dropped 20% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
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 20% per annum on average over the past ten years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
To Sum It Up
Should investors buy Greenhill for the upcoming dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
Curious what other investors think of Greenhill? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.