Updated 3/10/25
Griffon Corporation (NYSE: GFF) operates in the industrial and consumer products space, offering everything from garage doors to landscaping equipment. It has a long-standing presence in the market, serving both professional and residential customers. Over the years, the company has grown its business through acquisitions and strategic investments, carving out a niche in home and building products.
For investors focused on dividends, Griffon presents an interesting case. While it’s not a high-yielding stock, it does offer a stable payout with room for potential growth. The big question is whether it fits within a long-term income portfolio. Let’s take a closer look.
Key Dividend Metrics
📈 Forward Dividend Yield: 1.02%
💰 Annual Dividend Payout: $0.72 per share
📊 Payout Ratio: 12.86% (low and sustainable)
📅 Ex-Dividend Date: February 25, 2025
📆 Next Dividend Payment: March 18, 2025
📈 5-Year Average Dividend Yield: 1.19%
Dividend Overview
Griffon’s dividend yield of just over 1% may not turn heads, but it’s the company’s low payout ratio that makes it intriguing. At just under 13%, this suggests Griffon is reinvesting most of its profits into growth rather than prioritizing dividend payments. That’s not necessarily a bad thing, especially if the company can continue expanding its earnings over time.
One thing to note is that Griffon’s dividend history has been relatively stable but not necessarily growing at a fast clip. It’s a stock that provides income, but it’s not aggressively hiking payouts year after year like some dividend aristocrats. For investors looking for a steady, well-covered dividend, this might work. However, those seeking rapid dividend growth may want to explore other options.
Dividend Growth and Safety
While Griffon has kept its dividend intact, the growth aspect has been somewhat muted. The company’s dividend yield has actually declined slightly compared to its five-year average, which suggests that share price appreciation has outpaced dividend increases. That could be a good sign for overall business health, but it also means that investors won’t see major compounding from reinvested dividends.
On the safety front, the dividend is well-protected. With a payout ratio under 13%, Griffon has plenty of flexibility to continue making payments, even during economic downturns. The company also generates strong cash flow, with operating cash flow reaching $376.88 million over the trailing twelve months. This means there’s a comfortable cushion for dividends.
The biggest concern for long-term investors is Griffon’s high debt load. With a debt-to-equity ratio of over 700%, the company is carrying a significant amount of leverage. While this hasn’t impacted its ability to generate profits, it’s something that could limit dividend growth in the future if borrowing costs rise.
Chart Analysis
Price Action and Moving Averages
Griffon Corporation (GFF) has been trading in a volatile range over the past several months. The stock recently closed at $70.50, after reaching an intraday high of $70.83 and a low of $68.41. The price is currently sitting just above its 200-day simple moving average (SMA) but remains below the 50-day SMA, which suggests that short-term momentum is weakening.
The 50-day SMA has started to roll over, indicating that recent price action has been leaning bearish. The stock had a strong rally towards the end of last year, but it now appears to be in a consolidation or corrective phase. The fact that price recently dipped below the 200-day SMA and is now trying to reclaim it is an important level to watch. If it holds above this longer-term moving average, the stock could stabilize. If it breaks below again, it could indicate further downside pressure.
Volume and Market Participation
Trading volume on the latest session came in at 541,331 shares, which is relatively average for the stock. There are a few notable volume spikes in the past several months, especially in mid-summer and towards the end of the year. These spikes often coincide with sharp price movements, suggesting that institutional investors were either accumulating or distributing shares during those periods.
Lately, volume has been declining, which means there may be a lack of conviction in either direction. For bulls, this could be a warning sign that there isn’t enough demand to push the stock significantly higher in the near term. For bears, the absence of high selling volume suggests that there’s no panic-selling occurring either.
Relative Strength Index (RSI)
The Relative Strength Index (RSI) at the bottom of the chart shows that momentum has been trending downward. The stock was previously in overbought conditions, but it has since pulled back and is now in more neutral territory. The RSI is hovering around mid-range levels, meaning the stock isn’t particularly overbought or oversold at the moment.
This positioning suggests that the stock could go either way, depending on broader market conditions and company-specific catalysts. If RSI trends back up, it could signal a momentum shift. If it moves toward the oversold area, there could be further weakness ahead.
Recent Candlestick Action
The last five candlesticks show a mix of price action, with some buying support near the $68-$69 range but also rejection at higher prices. Wicks on both ends of these candles indicate indecision, meaning neither buyers nor sellers are fully in control. The most recent candle closed slightly higher than its open, but the presence of a longer upper wick suggests that attempts to push the stock higher were met with selling pressure.
This type of price action often signals that the market is waiting for more information before making a decisive move. If the stock can close strongly above the 50-day SMA, it might regain bullish momentum. If it continues to struggle at this level, more sideways or downward movement could be ahead.
Analyst Ratings
📈 Upgrades:
🔵 Stephens & Co.: On February 6, 2025, Stephens & Co. raised its price target for Griffon from $100 to $105, assigning an overweight rating. This adjustment indicates strong confidence in Griffon’s ability to outperform market expectations.
🟢 Raymond James: On the same day, Raymond James reiterated its strong-buy rating for Griffon and increased the price objective from $92 to $95. Analysts cited the company’s solid financial performance and growth potential as reasons for their bullish stance.
📉 Downgrades:
🔴 StockNews.com: Also on February 6, 2025, StockNews.com adjusted its rating on Griffon from strong-buy to buy, signaling a more cautious stance. While still positive on the stock, analysts noted some concerns over valuation and recent market trends.
⭐ Consensus Rating & Price Target:
The overall analyst consensus remains a buy, with an average price target of $98.75. While some firms remain highly bullish, others are taking a more measured approach, balancing Griffon’s growth prospects with broader economic uncertainties.
Earnings Report Summary
Griffon Corporation kicked off the first quarter of fiscal 2025 with a solid performance, showing both strengths and a few areas that need watching. While revenue dipped slightly, the company managed to boost profitability, which speaks to its ability to navigate changing market conditions.
Revenue and Profitability
The company brought in $632 million in revenue this quarter, a slight 2 percent drop from the same time last year. While that might seem like a setback, Griffon actually increased its adjusted EBITDA by 11 percent, hitting $145 million. This shows that while sales were slightly lower, the company found ways to manage costs and improve margins.
Performance by Business Segment
- Home and Building Products (HBP): This segment held steady, with a small 2 percent increase in EBITDA. A pickup in residential sales balanced out a drop in commercial demand, so the overall performance stayed strong.
- Consumer and Professional Products (CPP): Revenue here was down 4 percent, but the good news is that EBITDA jumped from $5 million to $18 million. That improvement came from better global sourcing and stronger demand in Australia.
Cash Flow and Shareholder Returns
One of the highlights of the quarter was Griffon’s ability to generate $143 million in free cash flow. The company has been putting that cash to work, buying back $42 million worth of shares, which has reduced outstanding shares by nearly 17 percent since April 2023. On top of that, they continue rewarding shareholders with a steady dividend of $0.18 per share, keeping up their long-standing tradition of consistent payouts.
Profit Margins on the Rise
Gross profit climbed from $237 million to $264 million, and margins improved as well. The gross margin came in at 41.8 percent, up 320 basis points from last year. Meanwhile, the adjusted EBITDA margin improved to 23 percent, which means the company is getting more efficient at turning revenue into profit.
Looking Ahead
Griffon reaffirmed its full-year outlook, aiming for $2.6 billion in revenue and expecting adjusted EBITDA to land somewhere between $575 million and $600 million. They’re also confident that free cash flow will outpace net income, which is a good sign of financial strength heading into the rest of the year.
Overall, despite a slight revenue dip, Griffon’s ability to improve profitability and reward shareholders suggests the company is in a strong position as it moves forward.
Financial Health and Stability
Griffon’s profitability metrics are strong, with an operating margin of 17.77% and a net profit margin of 9.13%. The company’s earnings per share have been on the rise, currently sitting at $4.90, with a notable 68% year-over-year earnings growth.
From a liquidity standpoint, the company’s current ratio of 2.51 indicates that it can comfortably meet its short-term obligations. It also holds $151.95 million in cash, which provides a level of financial security. However, the company’s high debt burden remains a potential risk, especially in an environment where interest rates are higher than they’ve been in recent years.
Valuation and Stock Performance
At around $69.55 per share, Griffon is trading at a trailing price-to-earnings ratio of 14.39, which is reasonable compared to historical levels. However, its price-to-book ratio of 14.71 suggests that the stock is trading at a premium relative to its book value.
Looking at recent stock movements, Griffon has seen a 52-week range of $55.01 to $86.73, meaning it has pulled back from its highs. The stock’s 50-day moving average sits at $74.45, while the 200-day moving average is at $70.11, indicating some near-term weakness.
With a beta of 1.36, Griffon tends to be more volatile than the broader market. That’s not necessarily a dealbreaker for dividend investors, but it does mean that the stock could see larger swings in price, which could impact those relying on stable returns.
Risks and Considerations
While Griffon offers some compelling financial metrics, there are a few risks to consider.
📉 The company’s high debt levels could limit its ability to grow dividends in the future, especially if interest rates remain elevated.
🔄 Dividend growth has been inconsistent, meaning investors looking for steady annual increases may not find what they’re looking for here.
📊 Revenue has declined slightly year-over-year, which could be an early sign of softening demand in its key markets.
⚡ Since Griffon operates in the home and building products space, it is somewhat tied to economic cycles. A slowdown in housing or consumer spending could impact earnings.
Final Thoughts
Griffon Corporation is an interesting stock for investors who want exposure to a solid business with a safe, albeit modest, dividend. The company’s strong earnings and low payout ratio make it a reliable income payer, but it lacks the aggressive dividend growth that some investors seek.
Its high debt levels introduce some risk, and dividend increases have not been a major focus for management. However, with strong cash flow and a sustainable payout, Griffon remains a stock that could fit into a diversified portfolio for those looking for steady, if unspectacular, dividend income. If management shifts toward prioritizing dividend growth, it could become a more attractive long-term income play. Until then, it remains a stock with a solid financial base, but one that requires a closer watch on its leverage and market trends.
Recent Comments