Shyft Group (NASDAQ:SHYF) Has Affirmed Its Dividend Of $0.05

The Shyft Group, Inc.'s (NASDAQ:SHYF) investors are due to receive a payment of $0.05 per share on 17th of June. Based on this payment, the dividend yield will be 1.6%, which is fairly typical for the industry.

View our latest analysis for Shyft Group

Shyft Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Shyft Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Shyft Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.10 in 2014, and the most recent fiscal year payment was $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Shyft Group's earnings per share has shrunk at 64% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

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. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 2 warning signs for Shyft Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.