Universal Logistics Holdings, Inc.'s (NASDAQ:ULH) investors are due to receive a payment of $0.105 per share on 3rd of October. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.
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 51% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Universal Logistics Holdings' Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Universal Logistics Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 13.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.0% by next year, which is in a pretty sustainable range.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the annual payment back then was $1.00, compared to the most recent full-year payment of $0.42. This works out to be a decline of approximately 8.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Universal Logistics Holdings has impressed us by growing EPS at 53% 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.
Universal Logistics Holdings Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. Taking the debate a bit further, we've identified 1 warning sign for Universal Logistics Holdings that investors need to be conscious of moving forward. 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.
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