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Knight-Swift Transportation Holdings Inc. (NYSE:KNX) stock is about to trade ex-dividend in four days. You will need to purchase shares before the 4th of March to receive the dividend, which will be paid on the 26th of March.
Knight-Swift Transportation Holdings's next dividend payment will be US$0.08 per share, on the back of last year when the company paid a total of US$0.32 to shareholders. Looking at the last 12 months of distributions, Knight-Swift Transportation Holdings has a trailing yield of approximately 0.7% on its current stock price of $43.2. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Knight-Swift Transportation Holdings can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Knight-Swift Transportation Holdings is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Knight-Swift Transportation Holdings's earnings per share have been growing at 11% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Knight-Swift Transportation Holdings has delivered an average of 4.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
Is Knight-Swift Transportation Holdings worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Knight-Swift Transportation Holdings more closely.
Wondering what the future holds for Knight-Swift Transportation Holdings? See what the 17 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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