Universal Logistics Holdings, Inc. (NASDAQ:ULH) Passed Our Checks, And It’s About To Pay A US$0.10 Dividend

Universal Logistics Holdings, Inc. (NASDAQ:ULH) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date.

Therefore, if you purchase Universal Logistics Holdings' shares on or after the 1st of September, you won't be eligible to receive the dividend, when it is paid on the 3rd of October. The company's next dividend payment will be US£0.10 per share, and in the last 12 months, the company paid a total of US£0.42 per share. Based on the last year's worth of payments, Universal Logistics Holdings stock has a trailing yield of around 1.1% on the current share price of £37.58.

Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing. See our latest analysis for Universal Logistics Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Universal Logistics Holdings paid out just 9.9% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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.

It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies. It's positive to see that Universal Logistics Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut. Story continues

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

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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. It's encouraging to see Universal Logistics Holdings has grown its earnings rapidly, up 38% a year for the past five years.

Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings. 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.

To Sum It Up

Is Universal Logistics Holdings an attractive dividend stock, or better left on the shelf?

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. There's a lot to like about Universal Logistics Holdings, and we would prioritise taking a closer look at it.

So while Universal Logistics Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Universal Logistics Holdings and you should be aware of it before buying any shares. Generally, we wouldn't recommend just buying the first dividend stock you see.

Here's a curated list of interesting stocks that are strong dividend payers. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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