J.B. Hunt Transport Services (NASDAQ:JBHT) Will Pay A Larger Dividend Than Last Year At $0.43

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) will increase its dividend on the 23rd of February to $0.43, which is 2.4% higher than last year's payment from the same period of $0.42. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for J.B. Hunt Transport Services

J.B. Hunt Transport Services' Dividend Is Well Covered By Earnings

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, J.B. Hunt Transport Services' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 57.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

J.B. Hunt Transport Services 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. Since 2014, the dividend has gone from $0.60 total annually to $1.68. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See J.B. Hunt Transport Services' Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that J.B. Hunt Transport Services has been growing its earnings per share at 9.5% a year over the past five years. J.B. Hunt Transport Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think J.B. Hunt Transport Services' payments are rock solid. While J.B. Hunt Transport Services 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for J.B. Hunt Transport Services that investors should take into consideration. Is J.B. Hunt Transport Services 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.