Granite Construction Incorporated (NYSE: GVA) to Ex-Dividend Soon
Granite Incorporated Construction (NYSE: GVA) is set to trade off-dividend within the next four days. The ex-dividend date is one business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. In other words, investors can buy Granite Construction shares before December 30 in order to be eligible for the dividend that will be paid on January 14.
The company’s upcoming dividend is US $ 0.13 per share, continuing the past 12 months when the company has distributed a total of US $ 0.52 per share to shareholders. Based on the value of last year’s payouts, Granite Construction has a 1.4% return on the current share price of $ 38.36. If you are buying this business for its dividend, you should know if Granite Construction’s dividend is reliable and sustainable. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
Dividends are usually paid out of the company’s profits, so if a company pays more than it earns, its dividend is usually at risk of being reduced. It paid out 76% of its profits as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a downturn in activity. We would be concerned if profits started to decline. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. The good news is that she has only paid out 24% of her free cash flow in the past year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
NYSE: GVA Historical Dividend December 25, 2021
Have profits and dividends increased?
When profits fall, dividend companies become much more difficult to analyze and safely own. If profits fall enough, the company could be forced to cut its dividend. With that in mind, we are hampered by the 15% per year drop in profits of Granite Construction over the past five years. When earnings per share decline, the maximum amount of dividends that can be paid also decreases.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Granite Construction’s dividend payouts are actually stable compared to 10 years ago. If a company’s dividend remains stable while profits are falling, it is usually a sign that it is paying a higher percentage of its profits. It can become unsustainable if income drops enough.
To sum up
Is Granite Construction worth buying for its dividend? The payout ratios are within a reasonable range, implying that the dividend can be sustainable. However, declining profits are a serious concern and could pose a threat to the dividend in the future. Overall, we are not extremely bearish on the stock, but there are probably better dividend investments.
So if you want to dig deeper into Granite Construction, you will find it worth knowing the risks this stock faces. To help you, we have discovered 1 warning sign for granite construction which you should know before investing in their stocks.
However, we don’t recommend simply buying the first dividend stock you see. here is a list of interesting dividend-paying stocks with a yield above 2% and a future dividend.
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