Ryder System Extends Dividend Boosts Streak to 15 Consecutive Years With 3.7% Dividend Hike (NYSE:R)
By: Ned Piplovic,
Ryder System, Inc. (NYSE:R), a transportation and supply chain service provider, extended its streak of annual dividend boosts to 15 consecutive years by promising a 3.7% hike to its quarterly payout amount in the upcoming round of dividend distributions.
In addition to a long record of rising dividends, the company’s current yield of 4% exceeds the average yields of its sector and segment peers by double-digit percentages. Furthermore, the company’s current dividend payout ratio of 40% indicates that the company’s dividend distributions are well-covered by its earnings. This payout level suggests that the company’s earnings should be able to maintain its current level of dividend payouts, as well as support future annual dividend boosts, at least, over the near term.
The current payout ratio is slightly higher than the company’s own 32% ratio average over the past five years. However, despite being higher than the five-year average, the current ratio is still in the middle of the 30% to 50% payout range that is considered by most investors to be robust and sustainable. A payout ratio above 30% indicates that an equity distributes a sufficient share of its earnings as dividends to attract and retain income-seeking investors’ interest in the stock.
However, a payout ratio above 50% implies that the company is using more than half of its earnings to cover dividend distributions, which could potentially reduce the cash needed for operational expenses and other business spending. As the payout ratio increases and approaches 100%, the chance that the company will be forced to cut or eliminate dividend payouts increases as well.
While the company’s share price is down more than 20% over the past year, the trend has shown signs of a potential reversal in direction. The analysts are split on their current stock recommendation. Five out of the nine analysts, or 56%, are neutral with a “Hold” recommendation. However, three out of the remaining four analysts are very optimistic with a “Strong Buy” recommendation and one other analyst has issued a “Buy” recommendation. Furthermore, the analysts’ current average target price is $70.44. Therefore, the current share price has nearly 25% room on the upside before it hits the current target price.
Investors who believe that the share price is likely to begin a recovery uptrend soon and deliver significant gains might use the current pullback as an opportunity to take position at the current discount. However, as with all investing decisions, interested investors must conduct their own due diligence to confirm the stocks upside potential, as well as ensure compatibility with their own investment portfolio strategy.
Interested investors should act before the upcoming August 15, 2019, ex-dividend date. Ryder System will distribute the next round of dividend distributions to all eligible shareholders on the September 20, 2019, pay date.
Ryder System, Inc. (NYSE:R)
Founded in 1933 and headquartered in Miami, Ryder System, Inc. provides transportation and supply chain management solutions to small businesses and large enterprises worldwide. The company operates through three segments: Fleet Management Solutions, Dedicated Transportation Solutions and Supply Chain Solutions.
Ryder offers fleet management solutions, including vehicles, as well as maintenance services, supplies, related equipment for operation of the vehicles, commercial vehicle rental services and contract maintenance services for trucks, tractors and trailers. The company also provides diesel fuel accessing services, offers other fuel services, such as fuel planning, fuel tax reporting, centralized billing, fuel cards and fuel monitoring services. Additionally, the company sells its used vehicles through 59 retail sales centers and its Usedtrucks.Ryder.com website.
Ryder System also offers dedicated services comprising equipment, maintenance and administrative services of a full-service lease with drivers, routing, scheduling, fleet sizing, safety, regulatory compliance, risk management, technology and communication systems support. Furthermore, the company provides distribution management services, such as managing the flow of goods from the receiving to the shipping function, coordinating warehousing and transportation for material flows, handling import and export for international shipments, coordinating just-in-time replenishment of component parts to manufacturing clients, providing shipments to customer distribution centers and final customer delivery points, as well as other services. Additionally, the company provides transport management services, such as shipment optimization, load scheduling and delivery confirmation services through a series of technological and web-based solutions.
The most recent of the consecutive dividend boosts increased the quarterly distribution 3.7% from $0.54 in the previous quarter to the $0.56 amount for the upcoming distribution. This new quarterly amount corresponds to a $2.24 annualized payout and currently yields 4%. The recent share price pullback pushed the current yield more than 50% above the Ryder System’s own 2.57% five-year yield average.
Ryder’s current yield outperformed the 2.15% yield average of the overall Services sector by more than 50%. Furthermore, the current 4% yield is also nearly 170% higher than the 1.47% simple average of Ryder’s peers in the Rental & Leasing Services segment and 28% higher than the 3.09% yield average of the segment’s only dividend-paying companies.
Since beginning the current streak of 15 consecutive annual dividend boosts in 2005, Ryder has enhanced its total annual dividend amount by nearly 280%. This advancement is equivalent to an average growth rate of 9.2% per year. However, more recent dividend boosts have occurred at higher rates. Therefore, the average annual dividend growth rate over the past five years is even higher, at 9.7%.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.