Utz Brands' (NYSE:UTZ) Upcoming Dividend Will Be Larger Than Last Year's

Utz Brands, Inc. (NYSE:UTZ) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of January to $0.057. Even though the dividend went up, the yield is still quite low at only 1.1%.

View 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. Despite not generating a profit, Utz Brands is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

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 4.5%, so there isn't too much pressure on the dividend.

Utz Brands Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of $0.20 in 2020 to the most recent total annual payment of $0.204. Dividend payments have grown at less than 1% a year over this period. 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.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Utz Brands has grown earnings per share at 9.4% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Utz Brands will make a great income stock. 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. We don't think Utz Brands is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Utz Brands that investors should know about before committing capital to this stock. 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.