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 Houlihan Lokey, Inc. (NYSE:HLI) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 4th of September to receive the dividend, which will be paid on the 16th of September.
Houlihan Lokey's next dividend payment will be US$0.31 per share. Last year, in total, the company distributed US$1.24 to shareholders. Looking at the last 12 months of distributions, Houlihan Lokey has a trailing yield of approximately 2.8% on its current stock price of $44.18. If you buy this business for its dividend, you should have an idea of whether Houlihan Lokey's dividend is reliable and sustainable. So we need to investigate whether Houlihan Lokey can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Houlihan Lokey paying out a modest 40% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Houlihan Lokey's earnings have been skyrocketing, up 20% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Houlihan Lokey has delivered 20% dividend growth per year on average over the past 4 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Houlihan Lokey an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Houlihan Lokey ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Ever wonder what the future holds for Houlihan Lokey? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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.