Houlihan Lokey’s Dividend Surge: A Testament to Financial Fortitude

Houlihan Lokey (NYSE:HLI), a global leader in corporate finance and restructuring advisory services, has announced a notable dividend increase to $0.60 per share for its fiscal 2025 second-quarter payment. This marks a 5% increase from its previous quarterly dividend of $0.57, underscoring the firm’s robust financial health and shareholder-friendly strategy. Let’s dissect the drivers behind this decision, its implications for investors, and what it reveals about HLI’s long-term trajectory.

The Dividend Increase: A Strategic Move Rooted in Strength

The dividend hike to $0.60 per share, effective for the June 15, 2025, payment, reflects HLI’s confidence in its financial performance. The increase builds on a 15% compound annual dividend growth rate since 2015, with no cuts despite market volatility. Historically, HLI has prioritized steady dividend growth, and this move continues that tradition.

The 5.26% annualized dividend increase (from $2.28 to $2.40 per share annually) may seem modest, but it aligns with HLI’s balanced approach to capital allocation. A 37% payout ratio—well below its projected 26.6% earnings growth rate for fiscal 2026—ensures this dividend is sustainable.

Financial Backing: Record Revenues and Earnings Fuel the Increase

HLI’s dividend hike is backed by stellar financial results. In fiscal 2025 (ended March 31, 2025), the company reported record revenues of $2.39 billion, a 25% year-over-year surge. This growth was driven by all three core segments:
- Corporate Finance: 38% revenue growth to $1.53 billion, fueled by high-fee M&A and private equity transactions.
- Financial Restructuring: 4% growth to $544 million, reflecting demand for restructuring advice in uncertain markets.
- Financial and Valuation Advisory: 11% expansion to $318 million, benefiting from increased valuation activity.

The strong performance translated to diluted EPS of $5.82, up 41% from $4.11 in fiscal 2024. Adjusted EPS reached $6.29, further solidifying the dividend’s foundation.

Dividend Yield and Investor Attractiveness

At $0.60 per quarter, HLI’s dividend yields 1.32% based on its recent stock price of ~$181. This is below the 2.74% average yield of the Financial Services sector, but HLI’s focus is on growth over income. The modest yield is offset by its 14% five-year EPS growth rate and the dividend’s consistency.

For income investors, HLI’s low payout ratio (37%) and cash reserves of $971 million provide reassurance. The dividend is also a barometer of management’s confidence, given that the firm’s cash flow comfortably covers distributions while funding growth initiatives.

Historical Reliability and Future Outlook
HLI has rewarded shareholders for over a decade, with dividends rising every year since its 2015 IPO. This track record is rare in advisory firms, where fee volatility often complicates dividend policies.

Analysts project 26.6% EPS growth in fiscal 2026, which could further boost the dividend. While the increase to $0.60 is for the June 2025 payment, HLI’s history suggests this may signal a new baseline for future payouts.

Investment Considerations
- For Growth Investors: HLI’s advisory-driven model thrives in volatile markets, and its dividend growth trajectory aligns with earnings expansion.
- For Income Investors: While the yield is modest, the dividend’s sustainability and growth potential make it a safer bet than higher-yielding peers with riskier payout ratios.
- Risk Factors: Advisory revenue can fluctuate with market cycles, and increased competition could pressure margins.

Conclusion: A Dividend Increase Backed by Substance
Houlihan Lokey’s dividend increase to $0.60 is more than a shareholder gesture—it’s a reflection of its operational excellence and financial discipline. With record revenues, a low payout ratio, and a track record of consistent dividend hikes, HLI positions itself as a reliable investment in an uncertain landscape.

The 5% quarterly dividend boost (and potential 1.32% annual yield) is small but meaningful, especially when paired with its 15% dividend CAGR since 2015. Investors seeking a blend of growth and income in the advisory sector would do well to consider HLI, particularly as its diversified advisory model continues to deliver.

In short, this dividend increase isn’t just a number—it’s a vote of confidence in HLI’s future.