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Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) has announced that it will pay a dividend of $1.50 per share on the 14th of June. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Diamond Hill Investment Group
Diamond Hill Investment Group's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Diamond Hill Investment Group's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share could rise by 1.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was $8.00, compared to the most recent full-year payment of $6.00. The dividend has shrunk at around 2.8% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Diamond Hill Investment Group May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Diamond Hill Investment Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. The company has been growing at a pretty soft 1.0% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
In Summary
Overall, a consistent dividend is a good thing, and we think that Diamond Hill Investment Group has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Diamond Hill Investment Group (1 is a bit concerning!) that you should be aware of before investing. 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.