Why Griffon (GFF) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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 -40.33% so far this year. The garage door and building products maker is currently shelling out a dividend of $0.08 per share, with a dividend yield of 2.47%. This compares to the Diversified Operations industry's yield of 2.54% and the S&P 500's yield of 2.41%.
Looking at dividend growth, the company's 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 15.01%. Future dividend growth will depend on earnings growth as well as 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.
Earnings growth looks solid for GFF for this fiscal year. The Zacks Consensus Estimate for 2020 is $1.32 per share, with earnings expected to increase 22.22% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. With that in mind, GFF presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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