Universal (NYSE:UVV) Is Paying Out A Dividend Of $0.82

The board of Universal Corporation (NYSE:UVV) has announced that it will pay a dividend on the 2nd of February, with investors receiving $0.82 per share. This means that the annual payment will be 6.2% of the current stock price, which is in line with the average for the industry.

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Universal's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment made up 73% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 1.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 76% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Universal

Universal 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 annual payment during the last 10 years was $2.08 in 2015, and the most recent fiscal year payment was $3.28. This implies that the company grew its distributions at a yearly rate of about 4.7% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Universal has seen EPS rising for the last five years, at 15% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

We Really Like Universal's Dividend

Overall, we like to see the dividend staying consistent, and we think Universal might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Universal has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Universal not quite the opportunity you were looking for? Why not check out our selection of top 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.