Is Universal Logistics Holdings, Inc. (NASDAQ:ULH) An Attractive Dividend Stock?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Universal Logistics Holdings, Inc. (NASDAQ:ULH) has paid a dividend to shareholders. It currently yields 2.0%. Let’s dig deeper into whether Universal Logistics Holdings should have a place in your portfolio.
See our latest analysis for Universal Logistics Holdings
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it paying an annual yield above 75% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share risen in the past couple of years?
Is its earnings sufficient to payout dividend at the current rate?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Universal Logistics Holdings pass our checks?
Universal Logistics Holdings has a trailing twelve-month payout ratio of 15%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect ULH’s payout to increase to 18% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.0%. However, EPS is forecasted to fall to $2.12 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Universal Logistics Holdings as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Universal Logistics Holdings produces a yield of 2.0%, which is high for Transportation stocks but still below the market’s top dividend payers.
Next Steps:
Whilst there are few things you may like about Universal Logistics Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for ULH’s future growth? Take a look at our free research report of analyst consensus for ULH’s outlook.
Valuation: What is ULH worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ULH is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
