Here's What We Like About UFP Industries, Inc.'s (NASDAQ:UFPI) Upcoming Dividend

It looks like UFP Industries, Inc. (NASDAQ:UFPI) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 29th of May in order to be eligible for this dividend, which will be paid on the 15th of June.

UFP Industries's upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.50 per share to shareholders. Looking at the last 12 months of distributions, UFP Industries has a trailing yield of approximately 1.2% on its current stock price of $43.36. If you buy this business for its dividend, you should have an idea of whether UFP Industries's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for UFP Industries

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. UFP Industries paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether UFP Industries generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see UFP Industries has grown its earnings rapidly, up 26% a year for the past five years. UFP Industries looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, UFP Industries has lifted its dividend by approximately 29% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

From a dividend perspective, should investors buy or avoid UFP Industries? UFP Industries 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. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks UFP Industries is facing. In terms of investment risks, we've identified 1 warning sign with UFP Industries and understanding them should be part of your investment process.

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. Thank you for reading.