Knight-Swift Transportation Holdings (NYSE:KNX) Will Pay A Larger Dividend Than Last Year At $0.14

The board of Knight-Swift Transportation Holdings Inc. (NYSE:KNX) has announced that it will be paying its dividend of $0.14 on the 27th of June, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

Check out our latest analysis for Knight-Swift Transportation Holdings

Knight-Swift Transportation Holdings' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Knight-Swift Transportation Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 11.0%. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Knight-Swift Transportation Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.24 in 2013, and the most recent fiscal year payment was $0.56. This means that it has been growing its distributions at 8.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Knight-Swift Transportation Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Knight-Swift Transportation Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Knight-Swift Transportation Holdings' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Knight-Swift Transportation Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.