Universal Corp's Dividend Analysis
Assessing the Sustainability and Growth of Universal Corp's Dividend
Universal Corp (NYSE:UVV) recently announced a dividend of $0.8 per share, payable on 2024-02-05, with the ex-dividend date set for 2024-01-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Universal Corp's dividend performance and assess its sustainability.
What Does Universal Corp Do?
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Universal Corp is a global leaf tobacco supplier. The company procures leaf tobacco from farmers, processes it, and sells it to companies that manufacture consumer tobacco products. Universal Corp does not manufacture or sell any consumer products itself. The company's segment includes Tobacco Operations and Ingredients Operations. It generates maximum revenue from the Tobacco Operations segment. Geographically, it derives a majority of revenue from the United States.
A Glimpse at Universal Corp's Dividend History
Universal Corp has maintained a consistent dividend payment record since 1971. Dividends are currently distributed on a quarterly basis. Universal Corp has increased its dividend each year since 1971. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 53 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Universal Corp's Dividend Yield and Growth
As of today, Universal Corp currently has a 12-month trailing dividend yield of 4.90% and a 12-month forward dividend yield of 4.93%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Universal Corp's annual dividend growth rate was 1.30%. Extended to a five-year horizon, this rate increased to 5.80% per year. And over the past decade, Universal Corp's annual dividends per share growth rate stands at 6.00%.
Based on Universal Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Universal Corp stock as of today is approximately 6.50%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Universal Corp's dividend payout ratio is 0.65.
Universal Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Universal Corp's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Universal Corp's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Universal Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Universal Corp's revenue has increased by approximately 10.60% per year on average, a rate that outperforms approximately 67.44% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Universal Corp's earnings increased by approximately 2.60% per year on average, a rate that outperforms approximately 34.09% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -2.00%, which outperforms approximately 17.14% of global competitors.
Engaging Conclusion
In conclusion, Universal Corp's consistent dividend track record, stable yield, and modest growth rates make it an attractive option for value investors seeking reliable income streams. The company's financial health, indicated by its payout ratio and profitability rank, suggests that the dividend is sustainable. Moreover, Universal Corp's solid growth metrics provide a reassuring outlook for the future. As investors consider adding UVV to their portfolios, they may ponder how these factors will continue to influence the company's ability to maintain and grow its dividend in the years to come. Could Universal Corp's strategic position in the tobacco industry and its financial stability make it a cornerstone for dividend-focused portfolios?
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
