Covenant Logistics Group (NYSE:CVLG) Has Announced A Dividend Of $0.07

The board of Covenant Logistics Group, Inc. (NYSE:CVLG) has announced that it will pay a dividend of $0.07 per share on the 28th of March. Including this payment, the dividend yield on the stock will be 0.8%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Covenant Logistics Group

Covenant Logistics Group's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Covenant Logistics Group 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.

The next year is set to see EPS grow by 33.1%. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Covenant Logistics Group Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the annual payment back then was $0.125, compared to the most recent full-year payment of $0.22. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Covenant Logistics Group has been growing its earnings per share at 57% a 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.

Our Thoughts On Covenant Logistics Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Covenant Logistics Group's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Covenant Logistics Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.