Have you been keeping an eye on Griffon Corporation's (NYSE:GFF) upcoming dividend of US$0.072 per share payable on the 20 June 2019? Then you only have 2 days left before the stock starts trading ex-dividend on the 23 May 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Griffon can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
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5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Griffon fit our criteria?
The current trailing twelve-month payout ratio for the stock is 49%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect GFF's payout to fall to 26% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.1%. However, EPS should increase to $1.05, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Unfortunately, it is really too early to view Griffon as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Griffon has a yield of 1.9%, which is on the low-side for Building stocks.
Taking all the above into account, Griffon is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three essential factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for GFF’s future growth? Take a look at our free research report of analyst consensus for GFF’s outlook.
- Valuation: What is GFF worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GFF is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
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.
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. Thank you for reading.