Utz Brands (NYSE:UTZ) Has Announced A Dividend Of $0.057

The board of Utz Brands, Inc. (NYSE:UTZ) has announced that it will pay a dividend on the 6th of July, with investors receiving $0.057 per share. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Utz Brands

Utz Brands' Earnings Easily Cover The Distributions

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, the company was paying out 223% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 49% which is fairly sustainable.

Utz Brands Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.20 in 2020 to the most recent total annual payment of $0.228. This implies that the company grew its distributions at a yearly rate of about 4.5% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Utz Brands Might Find It Hard To Grow Its Dividend

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 23% per annum. While EPS is growing rapidly, Utz Brands paid out a very high 223% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Utz Brands has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 3 warning signs for Utz Brands (of which 1 is significant!) you should know about. Is Utz Brands not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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