J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) Passed Our Checks, And It's About To Pay A US$0.44 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase J.B. Hunt Transport Services' shares on or after the 7th of November, you won't be eligible to receive the dividend, when it is paid on the 21st of November.

The company's next dividend payment will be US$0.44 per share, on the back of last year when the company paid a total of US$1.76 to shareholders. Based on the last year's worth of payments, J.B. Hunt Transport Services stock has a trailing yield of around 1.0% on the current share price of US$168.86. If you buy this business for its dividend, you should have an idea of whether J.B. Hunt Transport Services's dividend is reliable and sustainable. So we need to investigate whether J.B. Hunt Transport Services can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately J.B. Hunt Transport Services's payout ratio is modest, at just 30% of profit. A useful secondary check can be to evaluate whether J.B. Hunt Transport Services generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the last year.

It's positive to see that J.B. Hunt Transport Services's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for J.B. Hunt Transport Services

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at J.B. Hunt Transport Services, with earnings per share up 4.6% on average over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, J.B. Hunt Transport Services has lifted its dividend by approximately 7.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has J.B. Hunt Transport Services got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and J.B. Hunt Transport Services is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and J.B. Hunt Transport Services is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in J.B. Hunt Transport Services for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for J.B. Hunt Transport Services that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.