Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) is about to go ex-dividend in just 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Diamond Hill Investment Group's shares before the 23rd of November in order to receive the dividend, which the company will pay on the 9th of December.
The company's next dividend payment will be US$5.50 per share, and in the last 12 months, the company paid a total of US$10.00 per share. Based on the last year's worth of payments, Diamond Hill Investment Group has a trailing yield of 5.5% on the current stock price of $182.48. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Diamond Hill Investment Group
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. Fortunately Diamond Hill Investment Group's payout ratio is modest, at just 40% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see how much of its profit Diamond Hill Investment Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Diamond Hill Investment Group's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Diamond Hill Investment Group has lifted its dividend by approximately 7.2% a year on average.
The Bottom Line
Is Diamond Hill Investment Group worth buying for its dividend? Earnings per share have been flat in recent years, although Diamond Hill Investment Group reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Diamond Hill Investment Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Diamond Hill Investment Group has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 3 warning signs for Diamond Hill Investment Group you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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