GFF

Is the dividend sustainable given Griffon's current cash flow and debt levels?

Created August 06, 2025 at 07:31 PM

Short answer:

Based solely on the press‑release you provided, there is no information about Griff on’s cash‑flow generation, debt balances, or how the new $0.18 /share quarterly dividend fits into the company’s overall financial picture. Consequently, we cannot directly assess whether the dividend is sustainable.

What you need to evaluate sustainability

To answer the question rigorously you’ll need to pull several quantitative metrics from Griffon’s most recent financial statements (Form 10‑K, 10‑Q, or the latest earnings release). Below is a step‑by‑step framework you can follow, together with the specific data points you should collect and the analytical “rules‑of‑thumb” that analysts typically apply.

1. Gather the Core Financial Data

Metric	Where to find it	Why it matters
Operating cash flow (OCF) – most recent 12‑month (or FY) figure	Cash‑flow statement, 10‑K/10‑Q	Indicates how much cash the business generates from its core operations.
Free cash flow (FCF) = OCF – Capital expenditures (CapEx)	Cash‑flow statement (CapEx line)	The cash that is actually available for dividends, debt repayment, and growth after maintaining assets.
Net income	Income statement	Provides a baseline for the dividend‑payout ratio.
Dividends paid (last 12 months)	Statement of cash flows or dividend summary in 10‑K	Needed to compute payout ratios.
Total debt (short‑ and long‑term)	Balance sheet – “Long‑term debt,” “Current portion of long‑term debt”	Determines leverage and interest‑coverage pressure.
Interest expense	Income statement	Needed for interest‑coverage ratio.
Cash & cash equivalents	Balance sheet – “Cash and cash equivalents”	Helps gauge liquidity cushion.
Liquidity ratios (Current ratio, Quick ratio)	Balance sheet – current assets and liabilities	Indicates ability to cover short‑term obligations.
Debt‑to‑Equity (D/E) ratio	Balance sheet	Measures overall leverage.
Interest coverage ratio = EBIT / Interest expense	Income statement (EBIT)	Shows ability to service debt.
Historical dividend payout ratio = (Dividends paid ÷ Net income)	10‑K historical data	Shows how much of earnings have been paid out historically.
Historical dividend coverage = FCF ÷ Dividends paid	Compute from cash‑flow statement	Directly measures if cash generation covers dividends.

How to obtain these:

SEC Filings: Download the most recent Form 10‑K (annual) and Form 10‑Q (quarterly) from the SEC EDGAR database for “Griffon Corporation (GFF).”
Company Investor‑Relations site: Most public companies host a “Financials & Filings” section with PDFs of the latest earnings releases and PowerPoints that summarize cash‑flow and debt data.
Financial data platforms (e.g., Bloomberg, S&P Capital IQ, Morningstar) can give you the numbers in one view, but always cross‑check with the official filings.

2. Compute the Key Ratios

Ratio	Formula	Typical “healthy” benchmark*
Dividend payout ratio	Dividends per share ÷ (Net income ÷ Shares outstanding) OR (Cash dividends paid ÷ Net income)	30‑50 % is considered conservative for mature companies; >60 % may be a red flag unless supported by strong FCF.
Free‑cash‑flow‑to‑dividend (FCF coverage)	Free cash flow ÷ Cash dividends paid	>1.0 means the company generates enough cash to cover the dividend; <1.0 means it relies on other financing (e.g., debt) to pay dividends.
Debt‑to‑Equity (D/E)	Total debt ÷ Shareholders’ equity	<1.0 is generally “low‑moderate” for a diversified holding; >2.0 can signal high leverage, especially if interest coverage is weak.
Interest‑coverage ratio	EBIT ÷ Interest expense	>5 is comfortable; 2‑5 is moderate; <2 suggests risk.
Current ratio	Current assets ÷ Current liabilities	>1.5 indicates comfortable short‑term liquidity.

*These benchmarks are guidelines; industry‑specific norms and the company’s business model (e.g., capital‑intensive vs. service‑oriented) should be considered.

3. Analyze the Results

If FCF / Dividends > 1.0

– The dividend is covered by cash generated after capex, suggesting sustainability.
If FCF / Dividends < 1.0

– The company is paying more than it generates. Look for:
- Large cash reserves that could be used to “bridge” the shortfall (but this is a one‑off buffer).
- Debt issuance in recent quarters that could be funding the dividend.
Debt‑level check
- High D/E + low interest coverage may signal that the company must allocate cash to service debt, limiting how much it can afford to distribute.
- If the dividend is a large percentage of net earnings, the firm may be sacrificing growth or leverage reduction.
Historical trend
- Look at dividend growth over the past 3‑5 years: consistent increases with stable or rising FCF are positive signs.
- Conversely, if the dividend was just instated or increased sharply without a matching increase in cash flow, it may be a signal of future risk.

4. Practical “Rule‑of‑Thumb” for Griffon’s $0.18 /share Dividend

Without actual numbers, we can only illustrate possible scenarios:

Scenario	Cash‑flow/Dividends	Debt Level	Likely sustainability
Scenario A – FCF ≈ $80 M; dividend outflow ≈ $20 M; D/E = 0.6; Interest coverage = 7x	Strong – FCF covers dividend with a 4:1 ratio; low leverage.
Scenario B – FCF ≈ $30 M; dividend outflow ≈ $30 M; D/E = 2.3; interest coverage = 1.5x	Risky – No buffer; high debt may force cash away from dividends.
Scenario C – FCF ≈ $40 M; dividend outflow ≈ $30 M; D/E = 1.2; interest coverage = 5x	Moderately sustainable – Cash covers most of dividend, but any dip in cash‑flow would strain dividend.

(The numbers are illustrative only.)

5. How to Proceed

Retrieve the latest financial statements (ideally the most recent 10‑Q, which would include the quarter ending June 30 2025, and the 2024‑2025 annual report).
Calculate the ratios above.
Compare them to the “healthy” thresholds and to Griffon’s historical levels.
Check management commentary in the earnings call transcript or the “Management Discussion & Analysis” (MD&A) section. Companies often discuss “cash‑flow adequacy” and “dividend policy” explicitly.

If you find:

Free‑cash‑flow coverage > 1.0, Debt‑to‑Equity below 1.0‑1.5, and Interest‑coverage > 4‑5, the $0.18 dividend is likely sustainable.
Free‑cash‑flow coverage < 1.0, Debt‑to‑Equity > 2.0, and Interest‑coverage < 2, then the dividend may require additional financing and could be unsustainable without either a decline in debt or an improvement in cash generation.

6. Bottom Line (Given the Limited Information)

From the news alone, there is no direct evidence to confirm or reject sustainability.
The dividend amount ($0.18 per share) is modest in absolute terms for a company of Griffon’s size (likely a few hundred million dollars in market cap).
The board’s decision to declare a quarterly dividend signals confidence, but the true test lies in the company’s free‑cash‑flow coverage, leveraging ratio, and interest‑coverage—numbers that must be extracted from the most recent financial statements.

Action Item: Pull Griffon’s latest 10‑K and 10‑Q, compute the key ratios listed above, and compare them to the benchmarks. That will give you a quantitative answer to whether the dividend is sustainable under current cash‑flow and debt conditions. If you would like help interpreting those numbers once you have them, feel free to share the relevant figures and we can walk through the analysis together.