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Why You Might Be Interested In Knight-Swift Transportation Holdings Inc. (NYSE:KNX) For Its Upcoming Dividend – Simply Wall St


Knight-Swift Transportation Holdings Inc. (NYSE:KNX) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. This means that investors who purchase Knight-Swift Transportation Holdings’ shares on or after the 2nd of December will not receive the dividend, which will be paid on the 27th of December.

The company’s next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Based on the last year’s worth of payments, Knight-Swift Transportation Holdings has a trailing yield of 0.7% on the current stock price of $57.39. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s growing.

Check out our latest analysis for Knight-Swift Transportation Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Knight-Swift Transportation Holdings is paying out just 9.5% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Knight-Swift Transportation Holdings generated enough free cash flow to afford its dividend. Luckily it paid out just 11% of its free cash flow last year.

It’s positive to see that Knight-Swift Transportation Holdings’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

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NYSE:KNX Historic Dividend November 27th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Knight-Swift Transportation Holdings’s earnings have been skyrocketing, up 22% per annum for the past five years. Knight-Swift Transportation Holdings earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky “beep-beep”. We also like that it is reinvesting most of its profits in its business.’

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Knight-Swift Transportation Holdings has lifted its dividend by approximately 5.2% a year on average. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

From a dividend perspective, should investors buy or avoid Knight-Swift Transportation Holdings? Knight-Swift Transportation Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

On that note, you’ll want to research what risks Knight-Swift Transportation Holdings is facing. To help with this, we’ve discovered 1 warning sign for Knight-Swift Transportation Holdings that you should be aware of before investing in their shares.

If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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 (at) simplywallst.com.



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