It looks like Graham Holdings Company (NYSE: GHC) is set to be ex-dividend within the next four days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the 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. Thus, you can buy Graham Holdings shares before October 14 in order to receive the dividend that the company will pay on November 4.

The company’s next dividend will be US $ 1.51 per share. Last year, in total, the company distributed US $ 6.04 to shareholders. Looking at the last 12 months of distributions, Graham Holdings has a rolling return of approximately 1.0% on its current price of $ 602.69. If you are buying this company for its dividend, you should know if the Graham Holdings dividend is reliable and sustainable. You have to see if the dividend is covered by profits and if it increases.

Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, the dividend could be unsustainable. Graham Holdings pays only 5.5% of its after-tax profit, which is comfortably low and leaves plenty of leeway in the event of adverse events. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. It distributed 28% of its free cash flow in the form of dividends, a comfortable level of distribution for most companies.

It is positive to see that Graham Holdings’ dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger margin. security before the dividend is cut.

Click here to see how much of its profits Graham Holdings has paid in the past 12 months.

NYSE: GHC Historical Dividend October 9, 2021

Have profits and dividends increased?

Companies with consistently increasing earnings per share usually make the best dividend-paying stocks because they generally find it easier to increase dividends per share. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. It is encouraging to see that Graham Holdings has grown its profits rapidly, rising 23% per year over the past five years. Graham Holdings pays less than half of its earnings and cash flow, while simultaneously increasing earnings per share at a rapid pace. This is a very favorable combination which can often lead to a multiplication of the dividend in the long run, if profits increase and the company pays a higher percentage of its profits.

Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Graham Holdings’ dividend payouts per share have declined 4.3% per year on average over the past 10 years, which is not inspiring. It is unusual to see earnings per share increase at the same time as dividends per share are falling. We hope this is because the company is heavily reinvesting in its business, but it could also suggest that the business is erratic.

Last takeaways

Should investors buy Graham Holdings for the next dividend? Graham Holdings increased earnings per share while reinvesting in the business. Unfortunately, he has cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Graham Holdings looks strong on this analysis overall, and we would certainly consider taking a closer look.

In light of this, while Graham Holdings has an attractive dividend, it is worth knowing the risks associated with this stock. For example, we found 1 warning sign for Graham Holdings which we recommend that you consider before investing in the business.

If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.

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