What To Know Before Buying Houlihan Lokey Inc (NYSE:HLI) For Its Dividend

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 3 years Houlihan Lokey Inc (NYSE:HLI) has returned an average of 2.00% per year to investors in the form of dividend payouts. Does Houlihan Lokey tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Houlihan Lokey

5 questions I ask before picking a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is their annual yield among the top 25% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has the amount of dividend per share grown over the past?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

NYSE:HLI Historical Dividend Yield May 9th 18

How does Houlihan Lokey fare?

Houlihan Lokey has a trailing twelve-month payout ratio of 29.55%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 36.77%, leading to a dividend yield of around 2.21%. However, EPS is forecasted to fall to $2.58 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Houlihan Lokey as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, Houlihan Lokey generates a yield of 1.74%, which is on the low-side for Capital Markets stocks.

Next Steps:

If you are building an income portfolio, then Houlihan Lokey is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three key factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for HLI’s future growth? Take a look at our free research report of analyst consensus for HLI’s outlook.

2. Valuation: What is HLI worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HLI is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.