Yahoo Finance Ubiquiti (NYSE:UI) Is Paying Out A Larger Dividend Than Last Year
The board of Ubiquiti Inc. (NYSE:UI) has announced that it will be increasing its dividend on the 15th of September to US$0.60. This takes the annual payment to 0.6% of the current stock price, which unfortunately is below what the industry is paying.
See our latest analysis for Ubiquiti
Ubiquiti's 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. However, Ubiquiti's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 7.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 25%, which is comfortable for the company to continue in the future.
Ubiquiti's Dividend Has Lacked Consistency
Ubiquiti has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the first annual payment was US$0.17, compared to the most recent full-year payment of US$2.40. This means that it has been growing its distributions at 46% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Ubiquiti has impressed us by growing EPS at 31% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Ubiquiti Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Ubiquiti that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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.
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