Income Investors Should Know That J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) Goes Ex-Dividend Soon
J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase J.B. Hunt Transport Services' shares before the 11th of May in order to receive the dividend, which the company will pay on the 26th of May.
The company's upcoming dividend is US$0.42 a share, following on from the last 12 months, when the company distributed a total of US$1.68 per share to shareholders. Looking at the last 12 months of distributions, J.B. Hunt Transport Services has a trailing yield of approximately 0.9% on its current stock price of $179.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for J.B. Hunt Transport Services
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. J.B. Hunt Transport Services has a low and conservative payout ratio of just 18% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 60% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that J.B. Hunt Transport Services's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at J.B. Hunt Transport Services, with earnings per share up 7.4% on average over the last five years. Decent historical earnings per share growth suggests J.B. Hunt Transport Services has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. J.B. Hunt Transport Services has delivered 12% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid J.B. Hunt Transport Services? Earnings per share growth has been modest, and it's interesting that J.B. Hunt Transport Services is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, it's hard to get excited about J.B. Hunt Transport Services from a dividend perspective.
So while J.B. Hunt Transport Services looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for J.B. Hunt Transport Services you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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