Greenbrier Companies (NYSE: GBX) reaffirmed its dividend of $ 0.27

Greenbrier Companies, Inc. (NYSE: GBX) will pay a dividend of $ 0.27 on February 17. This makes the dividend yield of 2.4%, which will increase investor returns quite well.

Greenbrier Business Payment has strong revenue coverage

We like to see robust dividend yields, but it doesn’t matter if the payout isn’t sustainable. Prior to this announcement, Greenbrier Companies earnings easily covered the dividend, but free cash flow was negative. Since a dividend means the company pays investors money, this could prove to be a problem in the future.

Next year, EPS is expected to increase by 47.3%. If the dividend continues according to recent trends, we estimate that the payout ratio will be 49%, which is within the range that puts us at ease with the sustainability of the dividend.

NYSE: GBX Historical Dividend January 10, 2022

Greenbrier companies don’t have a long payment history

Even though the company has been paying a steady dividend for some time, we would like to see a few more years before we feel comfortable relying on it. Since 2014, the first annual payment was US $ 0.60, compared to the most recent annual payment of US $ 1.08. This works out to a compound annual growth rate (CAGR) of around 7.6% per year over that time period. Greenbrier Companies have a good track record of dividend growth, but we would wait until we see a longer track record before we get overconfident.

The potential for dividend growth is fragile

Investors in the company will be happy to receive dividends for some time. Unfortunately, things are not as good as they seem. Greenbrier Companies’ earnings per share have declined 19% per year over the past five years. A sharp drop in earnings per share isn’t terrible from a dividend standpoint. Even cautious payout ratios can be under pressure if earnings fall enough. On the bright side, earnings should gain ground over the next year or so, but until that turns into a trend we wouldn’t feel too comfortable.

Greenbrier corporate dividend does not seem sustainable

In summary, while it is good to see that the dividend has not been reduced, we are a little cautious about the payments of the Greenbrier companies, as there could be problems maintaining them in the future. While Greenbrier Companies earn enough to cover the payments, the cash flow is lacking. We would be a little cautious if we were relying on this security primarily for dividend income.

Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. To this end, Greenbrier Companies has 3 warning signs (and 2 which are a bit disturbing) we think you should know about. We have also set up a list of global stocks with a solid dividend.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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