Primoris Services Corporation (NASDAQ:PRIM) will pay a dividend of US$0.06 on the 15th of October. Based on this payment, the dividend yield on the company's stock will be 0.9%, which is an attractive boost to shareholder returns.
Primoris Services' Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Primoris Services' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 7.2%. If the dividend continues on this path, the payout ratio could be 10.0% by next year, which we think can be pretty sustainable going forward.
Primoris Services Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$0.10 in 2011, and the most recent fiscal year payment was US$0.24. This means that it has been growing its distributions at 9.1% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Primoris Services has grown earnings per share at 25% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We'd also point out that Primoris Services has issued stock equal to 11% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Primoris Services Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Primoris Services that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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Primoris Services Corporation, a specialty contractor company, provides a range of construction, fabrication, maintenance, replacement, and engineering services in the United States and Canada.
Fair value with mediocre balance sheet.