UFP Industries (NASDAQ:UFPI) Is Paying Out A Larger Dividend Than Last Year

The board of UFP Industries, Inc. (NASDAQ:UFPI) has announced that it will be paying its dividend of $0.30 on the 15th of September, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.2%.

View our latest analysis for UFP Industries

UFP Industries' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, UFP Industries' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 1.0% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 14%, which is comfortable for the company to continue in the future.

UFP Industries Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.133 in 2013 to the most recent total annual payment of $1.20. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year 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

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that UFP Industries has grown earnings per share at 31% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like UFP Industries' Dividend

Overall, a dividend increase is always good, and we think that UFP Industries is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for UFP Industries that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.