Don't Buy Greenhill & Co., Inc. (NYSE:GHL) For Its Next Dividend Without Doing These Checks
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 1st of December in order to be eligible for this dividend, which will be paid on the 16th of December.
Greenhill's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.20 per share to shareholders. Based on the last year's worth of payments, Greenhill stock has a trailing yield of around 1.4% on the current share price of $13.85. 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! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Greenhill
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Greenhill reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Greenhill was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
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 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Get our latest analysis on Greenhill's balance sheet health here.
To Sum It Up
Is Greenhill an attractive dividend stock, or better left on the shelf? It's hard to get past the idea of Greenhill paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
With that being said, if you're still considering Greenhill as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 2 warning signs for Greenhill that we strongly recommend you have a look at before investing in the company.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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