Universal (NYSE:UVV) Is Increasing Its Dividend To $0.82

Yahoo

25-05-2025

The board of Universal Corporation (NYSE:UVV) has announced that it will be increasing its dividend by 1.2% on the 4th of August to $0.82, up from last year's comparable payment of $0.81. The payment will take the dividend yield to 5.5%, which is in line with the average for the industry.
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We aren't too impressed by dividend yields unless they can be sustained over time. The last payment was quite easily covered by earnings, but it made up 119% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Over the next year, EPS could expand by 7.9% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, which is in the range that makes us comfortable with the sustainability of the dividend.
View our latest analysis for Universal
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $2.04 in 2015, and the most recent fiscal year payment was $3.24. This works out to be a compound annual growth rate (CAGR) of approximately 4.7% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Universal has grown earnings per share at 7.9% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Universal is earning enough to cover the payments, the cash flows are lacking. We don't think Universal is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Universal (1 is concerning!) that you should be aware of before investing. Is Universal not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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