Diamond Hill Investment Group, Inc.’s (NASDAQ:DHIL) investors are due to receive a payment of $1.50 per share on 13th of September. The dividend yield will be 3.8% based on this payment which is still above the industry average.
See our latest analysis for Diamond Hill Investment Group
Diamond Hill Investment Group’s Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. Based on the last payment, Diamond Hill Investment Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 0.9% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was $8.00, compared to the most recent full-year payment of $6.00. Doing the maths, this is a decline of about 2.8% per year. Declining dividends isn’t generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Achieve
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Diamond Hill Investment Group’s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.9% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn’t bad in itself, but unless earnings growth pick up we wouldn’t expect dividends to grow either.
Our Thoughts On Diamond Hill Investment Group’s Dividend
Overall, we think Diamond Hill Investment Group is a solid choice as a dividend stock, even though the dividend wasn’t raised this year. The payout ratio looks good, but unfortunately the company’s dividend track record isn’t stellar. The payment isn’t stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Diamond Hill Investment Group has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Diamond Hill Investment Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
