Evaluating The Safety Of UniFirst's Dividend

In today's dividend safety check, Benzinga Insights looks into UniFirst UNF to see if its 0.59% dividend yield is safe as the company is releasing its earnings on January 6, 2021 before the bell. To better understand this, we will be looking into the earnings-to-dividend payout ratio and whether the company's dividend has recently been cut.

UniFirst's Payout Ratio

A dividend's affordability can be measured by its payout ratio, which is equal to dividends per share divided by earnings per share. Investors should not be too concerned about UniFirst's relatively low payout ratio of 15.06%. When a payout ratio is low like this (i.e. below than 75%), it indicates that a company has the money needed to cover its dividend. A ratio closer to 100% could suggest that a company is struggling to pay its dividend.

Has UniFirst Cut Its Dividend in the Recent Past?

In general, past behavior does not predict future behavior, but companies that have recent histories of dividend cuts are more likely to cut them again. These companies have less of an incentive to appease income investors than companies with long histories of consistent or rising dividends. UniFirst has cut its dividend recently; in fact, the last cut was in 2021. This implies that the company's management is willing to solve budgetary issues by cutting dividends and could do so again in the future.

How Safe Is UniFirst's Dividend Overall?

UniFirst has failed one of our dividend safety tests. It has a low payout ratio but has three recent cases of dividend cuts. With all of this in mind, it is unlikely that UniFirst will cut its dividend next quarter.

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