The advice of Granite Incorporated Construction (NYSE: GVA) announced that it will pay a dividend on October 15, with investors receiving $ 0.13 per share. The dividend yield will be 1.3% based on this payment which is still above the industry average.
See our latest review for granite construction
Granite Construction distributions can be difficult to maintain
Impressive dividend yields are good, but it doesn’t matter much if the payouts can’t be sustained. Even though Granite Construction does not generate a profit, it generates healthy free cash flow that easily covers the dividend. This reassures us about the level of dividend payments.
Recently, EPS fell 65.6%, which could continue next year. While this does mean the business will not be profitable, we generally think the cash flow is greater and the current payout ratio is quite healthy, which is reassuring to us.
Granite construction has a solid track record
The company has a strong history of paying dividends with very little fluctuation. There hasn’t been much change in the dividend over the past 10 years. Dividends have grown relatively slowly, which is not huge, but some investors may appreciate the relative consistency of the dividend.
The potential for dividend growth is fragile
Investors who have held shares of the company for the past several years will be pleased with the dividend income they have received. Unfortunately, things are not as good as they seem. Over the past five years, it appears that Granite Construction’s EPS has declined by around 66% per year. A sharp drop in earnings per share isn’t terrible from a dividend standpoint. Even conservative payout ratios can be put under pressure if earnings fall enough.
In summary, while it is good to see that the dividend has not been reduced, we are a little cautious about the payments from Granite Construction, as there could be problems maintaining them in the future. The company brought in a lot of money to cover the dividend, but we don’t necessarily think that makes it a great dividend stock. We don’t think Granite Construction is a great stock to add to your portfolio if income is your primary goal.
Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. Since profits are not increasing, the dividend looks nowhere near as attractive. However, very few companies see their profits steadily dropping year on year, so it might be worth seeing what the 3 analysts we follow are predicting for the future. We have also set up a list of global stocks with a solid dividend.
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