The advice of Werner Enterprises, Inc. (NASDAQ: WERN) has announced that it will increase its dividend on July 20 to $ 0.12. This brings the annual payout to 0.8% of the current share price, which is sadly less than what the industry is paying.
See our latest review for Werner Enterprises
Werner Enterprises payment has strong revenue coverage
While return is important, another factor to consider regarding a company’s dividend is whether current payout levels are achievable. Prior to this announcement, Werner Enterprises’ dividend was only 13% of earnings, but it paid 326% of free cash flow. Such a high cash payout ratio could put the dividend under pressure and force the company to reduce it in the future if it were to go through a difficult time.
Over the next year, EPS is expected to increase by 20.4%. Assuming the dividend continues on recent trends, we think the payout ratio could be 13% by next year, which is in a fairly sustainable range.
The history of the company’s dividends has been marked by instability, with at least one decline in the past 10 years. The first annual payment in the past 10 years was US $ 1.45 in 2011, and the most recent year’s payment was US $ 0.48. The dividend has fallen by 67% over this period. Falling dividends are usually not what we are looking for, as they may indicate that the business is facing some challenges.
The dividend is expected to increase
Dividends have gone in the wrong direction, so we really want to see a different trend in earnings per share. We are encouraged to see that Werner Enterprises has increased its earnings per share by 11% per year over the past five years. With decent growth and a low payout ratio, we think this bodes well for Werner Enterprises’ prospects of increasing its dividend payouts going forward.
Our thoughts on the Werner Enterprises dividend
Overall, it’s probably not a high-income stock, although the dividend is being increased. While Werner Enterprises earns enough to cover the payments, the cash flow is lacking. This company is not part of the first income level providing shares.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. Taking the debate a little further, we have identified 1 warning sign for Werner Enterprises that investors need to be aware of going forward. We have also set up a list of global stocks with a solid dividend.
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