Valhi, Inc. (NYSE: VHI) will pay a dividend of $ 0.08 on June 24. This payout means that the dividend yield will be 1.2%, which is lower than the industry average.
While dividend yield is important for income investors, it is also important to take into account any significant change in the price of the shares, as this will generally outweigh the gains from distributions. Investors will be delighted to see that the Valhi share price has risen by 39% in the past 3 months, which is good for shareholders and may also explain a drop in dividend yield.
See our latest analysis for Valhi
Valhi’s income easily covers distributions
It would be nice if the yield was higher, but we should also check whether higher levels of dividend payouts would be viable. However, Valhi’s profits easily cover the dividend. This means that most of its profits are kept to grow the business.
If the trend of recent years continues, EPS will increase 8.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 18% by next year, which we believe can be quite sustainable going forward.
The company has a long history of dividends, but it doesn’t look good with the cuts of the past. The first annual payment in the past 10 years was US $ 1.60 in 2011, and the most recent year’s payment was US $ 0.32. This corresponds to a decrease of about 80% during this period. A business that decreases its dividend over time is usually not what we are looking for.
We could see Valhi’s dividend increase
Since the track record hasn’t been stellar, we really want to see earnings per share increase over time. Valhi has impressed us by increasing EPS by 8.6% per year over the past five years. With decent growth and a low payout rate, we think this bodes well for Valhi’s prospects of increasing his dividend payouts going forward.
Valhi looks like a big dividend
In summary, it’s good to see that the dividend remains constant, and we don’t think there is any reason to suspect that this could change in the medium term. Profits easily cover distributions and the company generates a lot of cash. Considering all of this, this looks like a good dividend opportunity.
Market movements attest to the high value of a coherent dividend policy compared to a more unpredictable one. However, there are other things for investors to consider when analyzing the performance of stocks. Taking the debate a little further, we have identified 2 warning signs for Valhi that investors need to be aware of moving forward. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.
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