Valhi (NYSE:VHI) Has Re-Affirmed Its Dividend Of US$0.08
The board of Valhi, Inc. (NYSE:VHI) has announced that it will pay a dividend of US$0.08 per share on the 23rd of September. This means the dividend yield will be fairly typical at 1.4%.
View our latest analysis for Valhi
Valhi's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Valhi's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Unless the company can turn things around, EPS could fall by 4.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 12%, which is definitely feasible to continue.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from US$1.60 in 2011 to the most recent annual payment of US$0.32. Dividend payments have fallen sharply, down 80% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Valhi May Find It Hard To Grow The Dividend
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, Valhi's earnings per share has shrunk at approximately 4.4% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Valhi's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Valhi that investors should take into consideration. We have also put together a list of global stocks with a solid 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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