Yahoo Finance Universal's (NYSE:UVV) Dividend Will Be Increased To $0.81
Universal Corporation (NYSE:UVV) will increase its dividend from last year's comparable payment on the 5th of August to $0.81. Based on this payment, the dividend yield for the company will be 6.7%, which is fairly typical for the industry.
Check out our latest analysis for Universal
Universal's Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Universal's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share could rise by 3.3% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 67% by next year, which is in a pretty sustainable range.
Universal Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $2.00 in 2014 to the most recent total annual payment of $3.24. This works out to be a compound annual growth rate (CAGR) of approximately 4.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 3.3% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 3.3% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Universal's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Universal's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Universal is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Universal (of which 1 is potentially serious!) you should know about. Is Universal 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
