Stock Analysis

Primoris Services (NASDAQ:PRIM) Has Affirmed Its Dividend Of US$0.06

  •  Updated
NasdaqGS:PRIM
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The board of Primoris Services Corporation (NASDAQ:PRIM) has announced that it will pay a dividend of US$0.06 per share on the 15th of July. This means the dividend yield will be fairly typical at 1.0%.

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Primoris Services' Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Primoris Services' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 17.7% over the next year. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NasdaqGS:PRIM Historic Dividend June 27th 2022

Primoris Services Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from US$0.12 to US$0.24. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Primoris Services has seen EPS rising for the last five years, at 27% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright 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 the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Primoris Services is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Primoris Services that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Primoris Services?

Primoris Services Corporation, a specialty contractor company, provides a range of construction, fabrication, maintenance, replacement, and engineering services in the United States and Canada.

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Rewards

  • Price-To-Earnings ratio (11.7x) is below the US market (14.9x)

  • Earnings are forecast to grow 12.8% per year

  • Earnings have grown 14.3% per year over the past 5 years

Risks

  • Debt is not well covered by operating cash flow

  • Significant insider selling over the past 3 months

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