Werner Enterprises (NASDAQ:WERN) Has Announced That It Will Be Increasing Its Dividend To US$0.13

Simply Wall St
·2 min read

Werner Enterprises, Inc.'s (NASDAQ:WERN) dividend will be increasing to US$0.13 on 19th of July. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Werner Enterprises

Werner Enterprises' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Werner Enterprises was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 2.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 14%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was US$1.80 in 2012, and the most recent fiscal year payment was US$0.52. The dividend has fallen 71% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Werner Enterprises has impressed us by growing EPS at 31% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Werner Enterprises' payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Werner Enterprises (1 is a bit concerning!) that you should be aware of before investing. Is Werner Enterprises 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.