Updated 3/10/25
Houlihan Lokey (NYSE: HLI) is a name that doesn’t always make headlines like the big banks, but in the world of financial advisory, it’s a powerhouse. The firm specializes in mergers and acquisitions, restructuring, and valuation services—essentially, the behind-the-scenes work that keeps businesses running efficiently. Unlike the massive Wall Street firms, Houlihan Lokey focuses on the middle market, where its expertise in advisory services has given it a strong reputation and steady revenue.
For dividend investors, HLI offers a unique mix of financial stability, consistent payouts, and growth potential. While it’s not a high-yield stock, its disciplined approach to returning cash to shareholders makes it a reliable addition to an income-focused portfolio. Let’s take a closer look at the dividend profile and whether HLI deserves a place in a dividend investor’s portfolio.
Key Dividend Metrics
📌 Dividend Yield: 1.45% (Forward), 1.44% (Trailing)
💰 Annual Dividend Rate: $2.28 per share
📈 5-Year Average Yield: 1.88%
🔄 Dividend Growth Rate: Consistently increasing over time
💡 Payout Ratio: 43.21%, leaving room for growth
📅 Ex-Dividend Date: March 3, 2025
📆 Next Dividend Payment: March 15, 2025
Dividend Overview
Houlihan Lokey’s dividend yield sits at 1.45%, which isn’t particularly high, but it’s a steady payout from a company with a solid track record of growth. Over the past five years, the average dividend yield has been 1.88%, which suggests that today’s lower yield is more a result of stock price appreciation rather than a slowdown in dividend growth.
The company maintains a payout ratio of 43.21%, meaning it distributes less than half of its earnings as dividends. That’s a healthy range—high enough to provide investors with a meaningful return but low enough to ensure the company retains enough cash for expansion, acquisitions, or navigating economic slowdowns.
With the next dividend payout scheduled for March 15, 2025, and the ex-dividend date on March 3, investors looking for a reliable, growing dividend should take note of these upcoming dates.
Dividend Growth and Safety
Houlihan Lokey has quietly built a strong record of increasing its dividend, making it attractive for those who prioritize growth over immediate yield.
✅ Payout Ratio Is Manageable: At just over 43%, there’s plenty of room for further increases without straining the company’s finances.
✅ Strong Cash Flow: With operating cash flow at $715.53 million, there’s no immediate risk of the company struggling to fund its dividend payments.
✅ Less Exposure to Market Cycles: Unlike traditional banks that are tied to interest rate swings, HLI’s advisory business has a steadier revenue stream.
The company’s dividend yield may not be eye-catching, but the safety and growth potential make it a strong candidate for long-term income investors.
Chart Analysis
The price action for Houlihan Lokey (HLI) is showing some interesting developments that dividend and long-term investors should take note of. There’s a clear shift happening, and understanding where the stock stands within its cycle can help frame expectations for both price movement and potential buying opportunities.
Moving Averages and Trend Shift
The chart includes both the 50-day and 200-day simple moving averages (SMA), which provide insight into the broader trend. For much of the past year, the stock had been in a strong uptrend, with the 50-day SMA staying well above the 200-day SMA. That’s the classic signal of a bullish market structure, where dips are bought and momentum carries the price higher.
However, a notable shift is occurring. The 50-day SMA has started rolling over and is now declining, while the price has dropped below it. More importantly, the stock is now testing its 200-day SMA from above, which is often a crucial support level. If it holds here and bounces, it could suggest stabilization. But if the price continues breaking below, it may confirm a deeper correction is underway.
Price Action and Recent Candle Behavior
Over the last several weeks, the price has been under steady selling pressure, with lower highs forming. The latest candles show some indecision—there have been long lower wicks, indicating buyers are stepping in at lower levels, but also upper wicks, which signal continued selling pressure on rallies. The most recent close at 157.47 is slightly above the day’s open, suggesting some intraday recovery.
If the price continues to hover around the 200-day SMA without breaking down, this could be an area where buyers start stepping back in. But if the selling persists, the next major support zone may be significantly lower.
Volume and Market Participation
Trading volume has remained relatively stable, with a few spikes that coincide with larger downward moves. This suggests that some distribution is taking place, where shares are changing hands from strong buyers to those willing to take on risk at lower prices.
Volume is a crucial piece of the puzzle. If a major bounce occurs off the 200-day SMA but is accompanied by low volume, it could indicate a weak rebound that may not hold. On the other hand, if volume picks up significantly on an up day, that could suggest strong institutional support.
RSI and Momentum Shift
The Relative Strength Index (RSI) at the bottom of the chart shows a clear loss of momentum. It had been in overbought territory late last year but has now steadily declined and is approaching oversold levels. While an RSI near 30 can sometimes indicate a stock is due for a bounce, it’s important to see confirmation from price action before assuming momentum will shift back up.
With RSI trending lower, it suggests that sellers still have control for now, and the stock has not yet shown signs of regaining strong upside momentum.
Analyst Ratings
📊 In recent months, Houlihan Lokey (HLI) has received a mix of analyst opinions, reflecting both optimism and caution. The consensus 12-month price target among analysts stands at approximately $194.40, suggesting a potential upside from current levels.
📈 Upgrades
🔹 Morgan Stanley recently adjusted its price target for HLI from $200 to $201, maintaining an “underweight” rating. This slight increase acknowledges some positive aspects of the business while still expressing caution about valuation and future growth.
🔹 Keefe, Bruyette & Woods also raised their price target from $170 to $192, keeping a “market perform” rating. Their adjustment reflects a recognition of improving fundamentals but suggests the stock is likely to move in line with the broader market rather than outperform it.
📉 Downgrades
🔻 StockNews.com downgraded HLI from a “buy” to a “hold” rating, signaling a more neutral stance. This suggests that while the stock remains fundamentally solid, analysts do not currently see a strong reason to add more shares at this level.
🔻 Wells Fargo & Company lowered their price target from $180 to $178, keeping an “underweight” rating. This reflects concerns that HLI may underperform relative to the market, possibly due to valuation concerns or sector-specific risks.
📌 The mix of upgrades and downgrades suggests that while HLI has strong fundamentals, analysts are divided on whether the current stock price fully reflects its value or if more room for growth exists.
Earnings Report Summary
Houlihan Lokey had a strong third quarter, with revenue climbing to $634 million, a big jump from $511 million in the same quarter last year. That’s a solid 24% increase, showing that the company’s core business areas are firing on all cylinders.
The Corporate Finance segment was the biggest contributor, pulling in $422 million, which is up 36% from last year’s $311 million. This growth came from a higher number of closed deals, meaning more companies were looking for M&A advisory and capital market services. However, the average fee per transaction took a slight dip, likely due to the types of deals they worked on during the quarter.
On the restructuring side, revenue was up just 2%, landing at $131 million compared to $129 million last year. While the growth here was more modest, it still indicates steady demand for financial restructuring services. Like corporate finance, the restructuring segment saw a small decline in transaction fees, but overall activity remained stable.
The Financial and Valuation Advisory division posted $82 million in revenue, marking a 14% increase from the previous year’s $72 million. More advisory work and an increase in client engagements helped drive this growth, as companies continued to seek valuation and fairness opinions.
On the expense side, employee compensation and benefits jumped to $403 million from $324 million last year. This makes sense, given the revenue increase, and the firm’s compensation ratio remained steady at 61.5%. Non-compensation costs came in at $95 million, slightly higher due to rent, depreciation, and some other operational expenses, though professional fees were lower.
Taxes were a bit of a sore spot this quarter, with the company paying $50 million, translating to a tax rate of 34.3%, which is higher than last year’s 31%. That bump was mainly due to increased state taxes and non-deductible expenses.
Operationally, the firm was busy. Corporate Finance closed 170 transactions this quarter, up from 117 a year ago. Restructuring deals also increased, with 41 transactions closed versus 30 last year. Even valuation services saw an uptick, which is a sign that more companies are looking for advisory expertise.
Overall, Houlihan Lokey delivered another strong quarter, with each business line contributing to growth. While some segments saw slight fee compression, the firm’s deal volume is increasing, showing that demand for financial advisory services remains strong.
Financial Health and Stability
One of the biggest advantages HLI has over many other financial firms is its strong balance sheet and profitability.
- Profitability Metrics
- Profit Margin: 16.00%, a solid sign of operational efficiency
- Operating Margin: 23.46%, well above most financial firms
- Return on Equity: 18.64%, indicating strong capital efficiency
- Balance Sheet Strength
- Cash Reserves: $799.34 million
- Total Debt: $433.03 million
- Debt-to-Equity Ratio: 20.81%, very manageable
- Current Ratio: 1.36, meaning the company has enough short-term assets to cover its liabilities
Having low debt levels and strong cash reserves means Houlihan Lokey is positioned to weather economic downturns while still rewarding shareholders. This financial discipline makes it an attractive choice for those seeking dividend stability.
Valuation and Stock Performance
Looking at valuation, HLI isn’t exactly a bargain stock, but its premium pricing reflects its strong performance.
- Price-to-Earnings (P/E) Ratio: 30.11 trailing, 21.51 forward
- Price-to-Book Ratio: 5.31, indicating the stock is valued at a premium compared to its net assets
- Enterprise Value/EBITDA: 20.94, meaning investors are willing to pay a higher multiple for this company’s earnings power
The stock has been on an upward trajectory, with a 52-week range between $121.81 and $192.10. Its 50-day moving average of $175.53 and 200-day moving average of $161.33 suggest it has been in an uptrend but has recently pulled back.
HLI’s beta of 0.73 indicates lower volatility compared to the broader market, making it a more stable option for dividend investors who prefer less risk.
Risks and Considerations
Every investment has risks, and Houlihan Lokey is no exception. Here are a few key points dividend investors should keep in mind.
📉 Economic Slowdowns: While HLI’s business is steadier than a traditional bank, a slowdown in deal-making could impact revenue.
💲 Valuation Concerns: The stock isn’t cheap, and while earnings growth supports its price, investors should be cautious about buying at a peak.
📊 Yield Is Lower Than Historical Averages: The current 1.45% dividend yield is below the 5-year average of 1.88%. This is largely due to stock appreciation, but income-focused investors might prefer stocks with a higher starting yield.
🔄 High Institutional Ownership: With institutions owning 103.64% of the stock, it’s largely controlled by large investment funds. This provides stability but can also mean significant price swings if institutions decide to reallocate capital.
Final Thoughts
Houlihan Lokey may not be the flashiest name in finance, but it has built a reputation for reliability, strong earnings, and steady dividend growth. For income investors, it offers a well-balanced mix of financial health, low debt, and cash flow strength that ensures dividend sustainability.
The company’s commitment to returning capital to shareholders, along with its consistent performance, makes it a compelling long-term dividend growth stock. While the yield isn’t high, the ability to steadily increase payouts over time makes it attractive for those looking for a combination of stability and income.
For those already holding shares, HLI remains a solid dividend payer with a strong business model. New investors might want to be mindful of valuation and consider adding shares on pullbacks rather than at current elevated levels. Either way, Houlihan Lokey continues to prove itself as a reliable dividend stock in the financial sector.
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