Knight-Swift Transportation Holdings' (NYSE:KNX) Dividend Will Be Increased To $0.16
Knight-Swift Transportation Holdings Inc. (NYSE:KNX) will increase its dividend from last year's comparable payment on the 25th of March to $0.16. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.
See our latest analysis for Knight-Swift Transportation Holdings
Knight-Swift Transportation Holdings' Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last dividend, Knight-Swift Transportation Holdings is earning enough to cover the payment, but then it makes up 116% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 15%, which we would be comfortable to see continuing.
Knight-Swift Transportation Holdings Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.24 in 2014 to the most recent total annual payment of $0.64. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Knight-Swift Transportation Holdings' EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Knight-Swift Transportation Holdings' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Knight-Swift Transportation Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated 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.
