Knight-Swift Transportation Holdings' (NYSE:KNX) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
May 29, 2021
NYSE:KNX

Knight-Swift Transportation Holdings Inc. (NYSE:KNX) has announced that it will be increasing its dividend on the 28th of June to US$0.10. Although the dividend is now higher, the yield is only 0.7%, which is below the industry average.

See our latest analysis for Knight-Swift Transportation Holdings

Knight-Swift Transportation Holdings' Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Knight-Swift Transportation Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 22.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 10% by next year, which is in a pretty sustainable range.

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NYSE:KNX Historic Dividend May 30th 2021

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was US$0.24 in 2011, and the most recent fiscal year payment was US$0.40. This means that it has been growing its distributions at 5.2% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Knight-Swift Transportation Holdings has seen EPS rising for the last five years, at 16% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Knight-Swift Transportation Holdings Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Knight-Swift Transportation Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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This article by Simply Wall St is general in nature. 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.
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