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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.
View our latest analysis for Knight-Swift Transportation Holdings
Knight-Swift Transportation Holdings' Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Knight-Swift Transportation Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 11.3%. If the dividend continues on this path, the payout ratio could be 13% 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 implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
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. Unfortunately, Knight-Swift Transportation Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If Knight-Swift Transportation Holdings is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
Knight-Swift Transportation Holdings Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Knight-Swift Transportation Holdings is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.