Utz Brands (NYSE:UTZ) Has Affirmed Its Dividend Of $0.061

Utz Brands, Inc. (NYSE:UTZ) has announced that it will pay a dividend of $0.061 per share on the 2nd of October. Including this payment, the dividend yield on the stock will be 1.8%, which is a modest boost for shareholders' returns.

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Utz Brands' Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Utz Brands' dividend was only 56% of earnings, however it was paying out 6,013% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, so there isn't too much pressure on the dividend.

Check out our latest analysis for Utz Brands

Utz Brands Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.20 in 2020 to the most recent total annual payment of $0.244. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Utz Brands hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Utz Brands has seen EPS rising for the last five years, at 57% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Utz Brands could prove to be a strong dividend payer.

Our Thoughts On Utz Brands' 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. While Utz Brands is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Utz Brands has 2 warning signs (and 1 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.