Be Sure To Check Out Universal Logistics Holdings, Inc. (NASDAQ:ULH) Before It Goes Ex-Dividend

By
Simply Wall St
Published
November 27, 2021
NasdaqGS:ULH
Source: Shutterstock

Readers hoping to buy Universal Logistics Holdings, Inc. (NASDAQ:ULH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Universal Logistics Holdings investors that purchase the stock on or after the 3rd of December will not receive the dividend, which will be paid on the 4th of January.

The company's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.42 to shareholders. Calculating the last year's worth of payments shows that Universal Logistics Holdings has a trailing yield of 2.2% on the current share price of $19.41. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Universal Logistics Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Universal Logistics Holdings has a low and conservative payout ratio of just 15% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 36% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

historic-dividend
NasdaqGS:ULH Historic Dividend November 28th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Universal Logistics Holdings's earnings per share have been growing at 15% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Universal Logistics Holdings has seen its dividend decline 8.3% per annum on average over the past 10 years, which is not great to see. Universal Logistics Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is Universal Logistics Holdings worth buying for its dividend? It's great that Universal Logistics Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Universal Logistics Holdings is facing. Every company has risks, and we've spotted 2 warning signs for Universal Logistics Holdings (of which 1 is concerning!) you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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