It looks like Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is about to go ex-dividend in the next four days. You will need to purchase shares before the 4th of March to receive the dividend, which will be paid on the 26th of March.

Knight-Swift Transportation Holdings’s upcoming dividend is US$0.08 a share, following on from the last 12 months, when the company distributed a total of US$0.32 per share to shareholders. Based on the last year’s worth of payments, Knight-Swift Transportation Holdings stock has a trailing yield of around 0.7% on the current share price of $43.2. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Knight-Swift Transportation Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Knight-Swift Transportation Holdings is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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

NYSE:KNX Historic Dividend February 27th 2021

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we’re glad to see Knight-Swift Transportation Holdings’s earnings per share have risen 11% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Knight-Swift Transportation Holdings has delivered 4.8% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Knight-Swift Transportation Holdings is keeping back more of its profits to grow the business.

Final Takeaway

Is Knight-Swift Transportation Holdings an attractive dividend stock, or better left on the shelf? Companies like Knight-Swift Transportation Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. In summary, Knight-Swift Transportation Holdings appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.

Curious what other investors think of Knight-Swift Transportation Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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