UniFirst (NYSE:UNF) Has Announced That It Will Be Increasing Its Dividend To $0.365
The board of UniFirst Corporation (NYSE:UNF) has announced that it will be increasing its dividend by 4.3% on the 2nd of January to $0.365, up from last year's comparable payment of $0.35. Even though the dividend went up, the yield is still quite low at only 0.9%.
UniFirst's Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, UniFirst's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 10.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for UniFirst
UniFirst Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $0.15, compared to the most recent full-year payment of $1.40. This means that it has been growing its distributions at 25% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. However, UniFirst has only grown its earnings per share at 2.7% per annum over the past five years. While EPS growth is quite low, UniFirst has the option to increase the payout ratio to return more cash to shareholders.
We Really Like UniFirst's Dividend
Overall, a dividend increase is always good, and we think that UniFirst is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 UniFirst analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.