Houlihan Lokey, Inc. (NYSE:HLI) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Houlihan Lokey, Inc. (NYSE:HLI) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 1st of September will not receive the dividend, which will be paid on the 15th of September.

Houlihan Lokey's next dividend payment will be US$0.33 per share. Last year, in total, the company distributed US$1.32 to shareholders. Based on the last year's worth of payments, Houlihan Lokey has a trailing yield of 2.2% on the current stock price of $59.73. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Houlihan Lokey

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Houlihan Lokey's payout ratio is modest, at just 42% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Houlihan Lokey's earnings per share have been growing at 16% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Houlihan Lokey has delivered 17% dividend growth per year on average over the past five years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Houlihan Lokey got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Houlihan Lokey ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

In light of that, while Houlihan Lokey has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Houlihan Lokey has 2 warning signs we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.