Griffin Industrial Realty, Inc. (NASDAQ:GRIF) stock is about to trade ex-dividend in 3 days time. You can purchase shares before the 5th of December in order to receive the dividend, which the company will pay on the 16th of December.
Griffin Industrial Realty's upcoming dividend is US$0.50 a share, following on from the last 12 months, when the company distributed a total of US$0.50 per share to shareholders. Looking at the last 12 months of distributions, Griffin Industrial Realty has a trailing yield of approximately 1.3% on its current stock price of $39.6. If you buy this business for its dividend, you should have an idea of whether Griffin Industrial Realty's dividend is reliable and sustainable. So we need to investigate whether Griffin Industrial Realty can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Griffin Industrial Realty's payout ratio is modest, at just 37% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 23% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Griffin Industrial Realty's earnings have been skyrocketing, up 27% per annum for the past five years. Griffin Industrial Realty is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, Griffin Industrial Realty has lifted its dividend by approximately 2.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
Is Griffin Industrial Realty worth buying for its dividend? It's great that Griffin Industrial Realty is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Griffin Industrial Realty looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Keen to explore more data on Griffin Industrial Realty's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.
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