Last Update 3/10/25
Knight-Swift Transportation is one of the largest trucking and logistics companies in North America, handling freight through truckload, less-than-truckload (LTL), and intermodal services. With a history of strategic acquisitions, including its merger with Swift Transportation in 2017 and the 2023 purchase of U.S. Xpress, the company has positioned itself as a key player in an industry that ebbs and flows with economic cycles.
For dividend investors, the real question is whether Knight-Swift provides steady, long-term income potential or if its cyclical nature makes it too risky. Let’s take a deep dive.
Key Dividend Metrics
📅 Forward Dividend Rate: $0.72 per share
📈 Forward Dividend Yield: 1.54%
💰 Trailing Dividend Rate: $0.64 per share
📉 Trailing Dividend Yield: 1.36%
📊 5-Year Average Dividend Yield: 0.88%
🔄 Payout Ratio: 87.67%
📆 Next Dividend Payment Date: March 25, 2025
❌ Ex-Dividend Date: March 7, 2025
Dividend Overview
Knight-Swift doesn’t have the most eye-catching dividend yield, but it has consistently paid and slightly increased its dividend over time. Currently, the forward yield of 1.54% is a bit higher than its five-year average, which could indicate a slight undervaluation based on historical trends.
The concern, however, is the high payout ratio of nearly 88%. This means the company is using most of its earnings to fund dividends, leaving little room for reinvestment or additional growth unless earnings pick up. While Knight-Swift has continued paying dividends even through weaker economic conditions, this high ratio makes future increases less likely unless profitability improves.
For investors looking for stable, high-yield dividend stocks, this may not be the most attractive option. But for those seeking steady income with some long-term growth potential, it still holds some appeal.
Dividend Growth and Safety
While Knight-Swift has a track record of dividend growth, the pace of increases has been relatively slow. The biggest concern is whether the dividend is sustainable given current earnings and cash flow trends.
- The company’s earnings can fluctuate significantly due to the cyclical nature of the freight industry.
- The payout ratio is high, which could limit future dividend hikes unless earnings rebound.
- Free cash flow has been negative in recent periods, which raises red flags about the company’s ability to fund both operations and dividend payments without relying on debt.
If Knight-Swift sees an earnings recovery, it could maintain or slightly increase its dividend. But in the event of a prolonged industry downturn, there’s a chance the dividend could be at risk of being reduced.
Chart Analysis
Recent Price Action
The stock has been in a clear downtrend recently, with a sharp decline from its peak near 60 to its current level around 47. The latest price action shows a steep drop, with the last few candles reflecting increased volatility. There is a notable break below both the 50-day and 200-day moving averages, signaling potential weakness in the trend.
Moving Averages
The 50-day moving average was providing some support for a while, but once the stock broke below it, selling pressure intensified. The 200-day moving average has also been breached, which could be a bearish sign. Typically, when the 50-day crosses below the 200-day, it forms what traders call a death cross, often seen as a longer-term bearish signal.
Volume Activity
The volume shows an increase during the recent selloff, indicating that traders are actively participating in the move downward. Spikes in volume, particularly on red days, suggest that selling pressure is coming from larger market participants rather than just retail investors.
RSI and Momentum
The Relative Strength Index (RSI) is sitting around 53, which is in neutral territory. While it isn’t signaling extreme overbought or oversold conditions, the trend in RSI has been pointing downward, suggesting weakening momentum. If RSI continues to drop below 40, it could indicate that sellers remain in control.
Support and Resistance Levels
Looking at previous price action, there seems to be some support around the 47 level, where the stock is currently hovering. If this level doesn’t hold, the next significant area of interest might be around 45, where buyers have stepped in before. On the upside, any recovery would likely face resistance near the 50-day moving average, which is trending lower.
Overall Trend and Market Sentiment
The general structure of the chart suggests that the stock is experiencing a correction after a strong rally in the latter half of last year. The inability to hold key moving averages and the sharp decline in recent sessions point to a shift in sentiment. While some investors might see this as a dip-buying opportunity, the stock will need to show signs of stabilization before any meaningful recovery can take place.
Analyst Ratings
📈 Upgrades:
🔵 On January 3, 2025, Susquehanna upgraded KNX from neutral to positive, raising the price target to 67 from 48. This upgrade was driven by expectations of improved freight market conditions and the company’s strategic positioning following recent acquisitions. Analysts cited operational efficiency improvements and a potential recovery in trucking demand as key reasons for the upgrade.
🟢 Raymond James maintained a strong buy rating on January 10, 2025, with a price target of 66. The firm highlighted Knight-Swift’s ability to adapt to changing freight cycles, strong cash flow generation, and disciplined capital allocation as reasons for its bullish stance.
📉 Downgrades:
🔴 Citigroup downgraded KNX to sell from neutral on November 12, 2024, setting a price target of 56. The downgrade was largely based on concerns over declining freight rates and margin compression in the trucking industry. Analysts pointed to potential earnings pressure in the first half of 2025, particularly as operating costs remain elevated.
🟠 Wolfe Research downgraded KNX to peer perform from outperform on July 11, 2024. The downgrade reflected a more cautious outlook on the company’s near-term performance, with analysts citing challenges in sustaining growth as the freight market enters a slower cycle.
📊 Consensus Price Target and Market Sentiment:
The consensus among 24 analysts is a buy rating, with an average price target of 63.67, suggesting a potential upside from current levels. While some firms remain optimistic about long-term industry trends and operational efficiencies, others are wary of near-term economic pressures and margin headwinds.
These mixed ratings highlight the varying perspectives on Knight-Swift’s outlook, balancing optimism for future growth with concerns about short-term freight industry challenges.
Earnings Report Summary
Knight-Swift Transportation just released its latest earnings, and the numbers show both challenges and opportunities. The company reported adjusted earnings per share of 0.36, which actually beat analyst expectations of 0.33. However, that’s still a drop from last year’s 0.47, showing that the freight market remains a tough space right now.
Revenue came in at 1.88 billion, slightly below the expected 1.91 billion and down from 1.92 billion in the same quarter last year. Weaker freight demand and aggressive pricing competition played a role in the decline, which has been a trend across the trucking industry.
How Each Segment Performed
- Truckload: This segment saw a 21.9% revenue boost, thanks largely to the acquisition of U.S. Xpress. However, that same acquisition increased costs, causing a higher operating ratio of 94.9%, meaning profitability took a hit.
- Less-Than-Truckload (LTL): Revenue here increased by 6.9%, with an adjusted operating ratio of 84.9%. The good news is that this segment actually improved compared to previous quarters, which isn’t something you typically see during this time of year.
- Logistics: This area took a hit, with a 10.3% drop in load volume year-over-year. Even worse, if you remove U.S. Xpress’s contribution, the drop jumps to 29.7%. That signals Knight-Swift is struggling to maintain volumes in this part of its business.
- Intermodal: There was a small 5.5% increase in load count, but revenue per load dropped sharply by 26.6%. That led to an operating ratio of 104.5%, which isn’t where they want to be. The intermodal business is feeling pressure, and margins are tight.
Financial Position and Outlook
Knight-Swift closed the quarter with 218 million in cash, but total debt sits at 3.28 billion, giving them a debt-to-equity ratio of 46%. Cash flow from operations was solid at 799 million, but free cash flow was actually negative at -35.75 million, which raises some concerns.
Looking ahead, the company acknowledges that the freight market remains uncertain. There’s still pricing pressure, and demand is choppy. Knight-Swift is focusing on integrating acquisitions, improving efficiency, and finding ways to drive profitability despite the headwinds.
Overall, this earnings report paints a picture of a company navigating a rough freight cycle while making moves to position itself for better times ahead.
Financial Health and Stability
From a financial standpoint, Knight-Swift presents a mixed picture.
- Cash on hand: $218 million
- Total debt: $3.28 billion
- Debt-to-equity ratio: 46%
- Operating cash flow: $799 million
The company’s debt levels are manageable, especially considering it operates in a capital-intensive industry. However, a debt-to-equity ratio of 46% means the company does carry a decent amount of leverage.
One potential concern is the current ratio of 0.85, which suggests that short-term liabilities exceed short-term assets. This could indicate some liquidity constraints if the company faces unexpected financial pressures.
While Knight-Swift has strong cash flow from operations, its recent negative free cash flow means it is spending more than it is generating when factoring in capital expenditures. That makes dividend sustainability a little more uncertain.
Valuation and Stock Performance
- Current Stock Price: $46.87
- 52-Week High: $61.51
- 52-Week Low: $45.55
- Trailing P/E Ratio: 64.21
- Forward P/E Ratio: 22.83
- Price-to-Book Ratio: 1.07
Knight-Swift’s valuation has been fluctuating, with a high trailing P/E ratio that suggests earnings have been under pressure. However, the forward P/E of 22.83 is more reasonable, indicating that analysts expect future earnings to improve.
The stock has underperformed the broader market over the past year, down more than 17% from its 52-week high. It is now trading closer to the low end of its range, which might be an opportunity if earnings stabilize. Historically, its price-to-book ratio of 1.07 suggests that the stock is not overly expensive at current levels.
Risks and Considerations
As with any investment, there are risks to consider before committing to Knight-Swift as a long-term dividend play.
🚛 Cyclical Industry Exposure – Trucking and freight businesses tend to rise and fall with the economy. During slowdowns, demand drops, leading to weaker revenues and profit margins.
📉 High Payout Ratio – With nearly 88% of earnings allocated to dividends, the company has little cushion if earnings decline further.
💰 Negative Free Cash Flow – While operating cash flow is solid, the company’s free cash flow has turned negative, meaning it’s spending more than it’s generating. That can be a warning sign for dividend sustainability.
📊 Debt Load – While not excessive, $3.28 billion in debt means the company must balance dividend payments with interest expenses and capital needs.
📉 Stock Performance Lagging – The stock has underperformed the market, which could indicate that investors are cautious about future earnings growth. While this might mean a buying opportunity, it could also reflect broader concerns about profitability.
Final Thoughts
For dividend-focused investors, Knight-Swift presents a moderate income opportunity with some potential risks. The 1.54% dividend yield is higher than its historical average, but the high payout ratio and recent negative free cash flow raise concerns about sustainability.
As a trucking company, Knight-Swift is inherently exposed to economic cycles, and earnings tend to rise and fall accordingly. The stock’s recent drop could offer an attractive entry point for long-term investors if earnings improve. However, for those looking for a stable, high-yield dividend stock with predictable income, this may not be the best option at the moment.
Overall, Knight-Swift remains a company to watch, especially for investors who can tolerate some cyclical risk in exchange for steady, long-term dividend growth potential.
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