Stock Analysis

Primoris Services (NASDAQ:PRIM) Will Pay A Dividend Of $0.06

  •  Updated
Source: Shutterstock

The board of Primoris Services Corporation (NASDAQ:PRIM) has announced that it will pay a dividend on the 13th of January, with investors receiving $0.06 per share. This makes the dividend yield 1.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Primoris Services

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. Based on the last payment, Primoris Services was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 40.0%. If the dividend continues on this path, the payout ratio could be 7.7% by next year, which we think can be pretty sustainable going forward.

NasdaqGS:PRIM Historic Dividend November 25th 2022

Primoris Services Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.12 in 2012 to the most recent total annual payment of $0.24. This means that it has been growing its distributions at 7.2% per annum over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Primoris Services has impressed us by growing EPS at 13% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Primoris Services' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Primoris Services (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Primoris Services is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis