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Primoris Services' (NASDAQ:PRIM) Dividend Will Be US$0.06

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  • PRIM

Primoris Services Corporation (NASDAQ:PRIM) will pay a dividend of US$0.06 on the 15th of October. This makes the dividend yield 0.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Primoris Services

Primoris Services' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Primoris Services' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 6.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 10%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Primoris Services Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the dividend has gone from US$0.10 to US$0.24. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Primoris Services has grown earnings per share at 25% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We'd also point out that Primoris Services has issued stock equal to 11% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Primoris Services Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Primoris Services that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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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