Last update on 2024-06-27

Covenant Logistics Group (CVLG) - Dividend Analysis (Final Score: 4/8)

Detailed dividend analysis of Covenant Logistics Group (CVLG) with highlights on performance, stability, and criteria for scoring. Final score: 4/8.

Short Analysis - Dividend Score: 4

We're running Covenant Logistics Group (CVLG) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Covenant Logistics Group (CVLG) scored 4 out of 8 on the dividend analysis criteria. Here's a quick breakdown: 1. CVLG's dividend yield is lower than the industry average, indicating potentially lower returns for investors compared to peers. 2. The company has no average annual dividend growth rate since it only started paying dividends recently, which is unfavorable for income-focused investors. 3. The payout ratio is very low, signifying financial stability but not appealing to those seeking high dividends. 4. EPS to dividend coverage fluctuates, implying potential instability in maintaining dividend payments. 5. Dividend coverage by free cash flow is also volatile, raising concerns about consistent payouts. 6. Dividends have not been stable, with significant fluctuations and reductions. 7. CVLG does not have a long-term history of paying dividends, having only started in 2022. 8. Stock repurchases have been inconsistent, showing only moderate commitment to enhancing shareholder value.

Insights for Value Investors Seeking Stable Income

Considering the volatile and short history of dividend payments by Covenant Logistics Group (CVLG), it may not be the best choice for income-seeking investors who prioritize stable and reliable dividends. The company demonstrates financial stability and potential for growth, but the lack of a consistent and long-term dividend policy may not meet the expectations of those looking for regular income from their investments. It's worth monitoring CVLG for future developments, but there may be more appealing options for dividend-focused investors at this time.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the annual dividend payment to shareholders expressed as a percentage of the stock's current price. It is important to consider because it indicates the return on investment from dividends alone, without accounting for capital gains.

Covenant Logistics Group (CVLG) has a current dividend yield of 0.4778%, which is notably lower than the industry average of 0.67%. Over the past 20 years, CVLG has only paid dividends in the last two years, with a yield of 0.8273% in 2022 and 0.4778% in 2023. This trend highlights CVLG's recent transition towards providing shareholder returns via dividends. In contrast, the industry shows more consistent and generally higher yields, reaching its peak in certain years (e.g., 2020's 7.72%) possibly reflecting broader market trends. Despite the company's stock price appreciating from $34.57 in 2022 to $46.04 in 2023, the reduced yield could suggest either a smaller dividend increase relative to stock price growth or a strategic redistribution of earnings into reinvestment or other expenses. The lower yield relative to the industry average suggests investors looking for higher dividend returns may need to temper expectations with CVLG, considering its modest history of dividend payments.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) assesses how much a company's dividend payments have increased annually over a specified period. A higher DGR is often seen as a signal of financial health and confidence in future earnings, making it a crucial metric for investors valuing income growth.

Given that Covenant Logistics Group (CVLG) has a Dividend Ratio with a substantial negative value of -23.0769% in 2023 and no positive dividends for the last 20 years, it is evident that the company has not been focusing on returning capital to shareholders through dividends. The Average Dividend Ratio of -1.0989 further supports this trend, indicating that the Dividend Growth Rate is non-existent or negative. This is generally unfavorable for income-seeking investors, as the company does not provide a consistent or growing dividend income.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio measures the percentage of earnings a company pays to shareholders as dividends. Keeping it below 65% ensures sustainable and consistent dividend payouts.

The payout ratio for Covenant Logistics Group over the past 20 years has been significantly low, with years showing a 0% payout due to absence of dividends, and a small peak in 2022 with a payout ratio of around 3.95%. The recent Average Payout Ratio being around 0.188% indicates high reinvestment into the company and conservative cash management. This trend is good as it signals financial stability and potential for continuous growth, although investors seeking high dividends might not find this appealing.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings (Earnings per Share) and why it is important to consider.

A ratio of Earning per Share (EPS) to Dividend per Share can indicate whether a company's earnings are sufficient to support its dividend payments. For Covenant Logistics Group (CVLG), looking at EPS and DPS from 2003 to 2023, it is clear that some years have negative EPS, and no dividends were paid out before 2021. Tests some positive years like 2015 with an EPS of 2.2983 but didn't distribute dividends. In 2021, EPS was 3.6143 and a dividend of 0.286 was covered by EPS. However, there were inconsistencies, such as in 2023, where the EPS is 0, making dividend coverage impossible. This trend is concerning because a lack of consistent earnings to cover dividends could signal financial instability or over-extension. Therefore, the trend can be seen as bad, particularly due to varying EPS and very recent commencement of dividends, showing the potential volatility and uncertainty in future dividend sustainability.

Dividends Well Covered by Cash Flow?

A company's ability to cover dividends with cash flow indicates financial health and sustainability. If the free cash flow is consistently sufficient to cover dividends, it reflects good management of resources and a strong underlying business. Conversely, if dividends are not well-covered, it may signal potential liquidity issues or unsustainable dividend policies.

From 2003 through 2015, Covenant Logistics Group (CVLG) consistently reported negative free cash flow, indicating significant financial challenges and perhaps aggressive reinvestment in the business. Notably, the company only began paying dividends in 2019, with an initial dividend payout of $4,287,000. The free cash flow had a notable positive shift in 2018 ($49,658,000), but still encountered negative figures subsequently. Specifically, the dividend coverage ratios in recent years showed improvement: 2019 (-0.057), 2020 (-0.138), 2021 (0.113), 2022 (0.073), and 2023 (-0.044). While 2021 and 2022 demonstrated coverage above 0, making it a bit reassuring, the general trend is volatile. This volatility may raise concerns about the sustainability of dividends without consistent robust free cash flow generation. The recent negative coverage in 2023 is particularly concerning, reclaiming doubts about long-term dividend stability. Therefore, the trend, though unstable, signifies the need for a cautiously optimistic approach moving forward.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years: Assessing the stability of dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is crucial for income-seeking investors. This enables them to rely on a consistent income stream from their investments even in volatile market conditions.

Analyzing the dividend per share (DPS) values over the past 20 years for Covenant Logistics Group (CVLG), we observe significant fluctuations and absences in dividend payments. Only in the last two years, we see evidence of any dividend distribution: $0.286 in 2022 and $0.22 in 2023, marking a decrease of about 23%. The earlier years (2003 - 2021) show no dividend payouts at all. Hence, for income-seeking investors, CVLG does not offer the desired stability in its DPS. The recent reduction exceeding 20% further challenges the reliability aspect. Therefore, this trend is unfavorable for this criterion.

Dividends Paid for Over 25 Years?

Reviewing a history of dividend payments over a span of 25 years allows investors to identify companies with stable and reliable profit distribution.

Examining Covenant Logistics Group (CVLG), it's evident that the company did not pay any dividends at all for 24 straight years, specifically from 1998 to 2021. It wasn't until 2022 that a dividend of $0.286 per share was paid, followed by a slightly reduced dividend of $0.22 per share in 2023. This indicates that CVLG has only recently started paying dividends, and thus does not meet the criterion of having paid dividends for over 25 years. Given the absence of dividends for the majority of this period, this is a negative trend for investors seeking long-term dividend stability and consistency.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years entail consistently reducing the number of outstanding shares, which can increase earnings per share (EPS) and share value.

Covenant Logistics Group's share repurchase activity over the past 20 years has been relatively inconsistent. The company showed notable stock buybacks during the years 2005, 2006, 2016, 2019, 2020, and 2021. For instance, from 2019 to 2021, the number of shares decreased from 18.435 million to 16.803 million, and then to 15.006 million, showing a focused effort in stock repurchases. However, it is worth noting that there were significant years such as 2015, 2016, and 2017 where the number of shares significantly increased. Overall, the average repurchase figure of -4.7748 across 20 years indicates only moderate diligence in stock buybacks. This trend isn't particularly strong, but it does show some level of commitment to enhancing shareholder value through share repurchases, especially in more recent years.