Universal Logistics Holdings (NASDAQ:ULH) Is Due To Pay A Dividend Of $0.105
Universal Logistics Holdings, Inc. (NASDAQ:ULH) has announced that it will pay a dividend of $0.105 per share on the 1st of April. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Universal Logistics Holdings' stock price has increased by 39% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Universal Logistics Holdings
Universal Logistics 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. Prior to this announcement, Universal Logistics Holdings' dividend was only 12% of earnings, however it was paying out 164% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Over the next year, EPS is forecast to expand by 22.8%. 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.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from $0.28 total annually to $0.42. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Universal Logistics Holdings has impressed us by growing EPS at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Universal Logistics Holdings' prospects of growing its dividend payments in the future.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Universal Logistics Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Universal Logistics Holdings that investors should take into consideration. Is Universal Logistics Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.
