Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) will pay a dividend of $1.50 on the 16th of June. Based on this payment, the dividend yield on the company’s stock will be 6.1%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Diamond Hill Investment Group
Diamond Hill Investment Group’s Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Diamond Hill Investment Group was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
If the trend of the last few years continues, EPS will grow by 0.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 67% by next year, which we think can be pretty sustainable going forward.
The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from $5.00 total annually to $10.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. A reasonable rate of dividend growth is good to see, but we’re wary that the dividend history is not as solid as we’d like, having been cut at least once.
The Dividend’s Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Diamond Hill Investment Group hasn’t seen much change in its earnings per share over the last five years. Diamond Hill Investment Group is struggling to find viable investments, so it is returning more to shareholders. This isn’t bad in itself, but unless earnings growth picks up we wouldn’t expect dividends to grow either.
Our Thoughts On Diamond Hill Investment Group’s Dividend
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Diamond Hill Investment Group’s payments, as there could be some issues with sustaining them into the future. The company hasn’t been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. At the same time, there are other factors our readers should be aware of before pouring capital into a stock. For example, we’ve picked out 1 warning sign for Diamond Hill Investment Group that investors should know about before committing capital to this stock. Is Diamond Hill Investment Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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