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Griffon (GFF) is a Top Dividend Stock Right Now: Should You Buy?

Zacks Equity Research
·2 min read

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Griffon in Focus

Headquartered in New York, Griffon (GFF) is a Conglomerates stock that has seen a price change of -29.02% so far this year. Currently paying a dividend of $0.08 per share, the company has a dividend yield of 2.08%. In comparison, the Diversified Operations industry's yield is 1.92%, while the S&P 500's yield is 2.16%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.30 is up 3.4% from last year. Griffon has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 13.78%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Griffon's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, GFF expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $1.32 per share, which represents a year-over-year growth rate of 22.22%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that GFF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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