Werner Enterprises (NASDAQ:WERN) Is Due To Pay A Dividend Of $0.14

Werner Enterprises, Inc. (NASDAQ:WERN) has announced that it will pay a dividend of $0.14 per share on the 7th of May. This means that the annual payment will be 1.9% of the current stock price, which is in line with the average for the industry.

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Werner Enterprises' Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the dividend made up 102% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 24%, which is in a comfortable range for us.

View our latest analysis for Werner Enterprises

Werner Enterprises 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 2015, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.56. This means that it has been growing its distributions at 11% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Werner Enterprises' earnings per share has shrunk at 25% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Werner Enterprises' payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Werner Enterprises is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Werner Enterprises (2 can't be ignored!) that you should be aware of before investing. Is Werner Enterprises 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.