UFP Industries (NASDAQ:UFPI) Is Increasing Its Dividend To US$0.25

UFP Industries, Inc. (NASDAQ:UFPI) will increase its dividend on the 15th of June to US$0.25. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

View our latest analysis for UFP Industries

UFP Industries' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, UFP Industries' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 4.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 9.9%, which we are pretty comfortable with and we think is feasible on an earnings basis.

UFP Industries 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 dividend has gone from US$0.13 in 2012 to the most recent annual payment of US$0.80. This means that it has been growing its distributions at 20% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. UFP Industries has impressed us by growing EPS at 42% per year over the past five years. 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.

We Really Like UFP Industries' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for UFP Industries you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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