Dividend Kings In Focus: Universal Corporation

Up to date on July ninth, 2025 by Felix Martinez

Whereas there are numerous dividend-paying shares available in the market, there are solely 50 shares which have supplied a rising dividend for at the very least 50 consecutive years. This unique group of shares is known as the Dividend Kings.

You may see the complete downloadable spreadsheet of all 55 Dividend Kings (together with necessary monetary metrics akin to dividend yields, payout ratios, and price-to-earnings ratios) by clicking on the hyperlink beneath:

Dividend Kings In Focus: Universal Corporation

Earlier this yr, Common Company (UVV) elevated its dividend for the fifty fifth consecutive yr. This text will evaluate the corporate to find out if the inventory earns a purchase suggestion as we speak.

Enterprise Overview

Common Company is the world’s largest exporter and importer of tobacco leaves. It’s also a wholesale purchaser and processor of tobacco, working as a go-between for farms and the businesses that manufacture cigarettes, pipe tobacco, and cigars. Common Company has been in enterprise since 1886 and is headquartered in Richmond, Virginia.

Common Company has an in depth international presence.

Supply: Investor Presentation

Common Company has a presence in additional than 30 nations and employs over 20,000 everlasting and seasonal staff.

Common Company has had a tough couple of years. Earnings per share really declined from 2010 to 2023. There have been years of sporadic progress, however general, EPS declined in that 13-year interval.

Nonetheless, the corporate’s enterprise has some shiny spots that would result in future returns, to not point out a really interesting dividend yield, which at the moment stands at practically 5.7%.

Common Company reported fiscal yr 2025 income of $2.9 billion, up 7% from $2.7 billion in 2024, pushed by increased tobacco gross sales costs. Working revenue rose 5% to $232.8 million, with adjusted working revenue up 6% to $243.4 million. Internet revenue fell 21% to $95.0 million ($3.78 per diluted share), and adjusted internet revenue dropped 8% to $116.3 million ($4.63 per share), impacted by a $14.1 million pension settlement cost. This fall income declined 9% to $702.3 million, with working revenue down 37% to $42.8 million resulting from decrease tobacco volumes. Working money movement was $5.4 million, with internet debt down $179.6 million to $816.6 million.

The Tobacco Operations phase reported 7% income progress to $2.6 billion and eight% working revenue progress to $240.2 million, pushed by sturdy demand, high-quality African burley crops, and better carryover gross sales, regardless of a 4% decline in quantity. The Elements Operations phase grew income 9% to $338.6 million and working revenue 212% to $12.3 million, pushed by increased gross sales volumes and value-added merchandise from the expanded Lancaster, Pennsylvania, facility. This fall Tobacco gross sales fell 12% to $612.6 million resulting from earlier shipments, whereas Elements gross sales rose 20% to $89.7 million, boosted by beverage class merchandise.

Common anticipates continued tobacco demand and bigger international crops in FY26, shifting to balanced provide. The corporate expects sustained progress in components, supported by buyer curiosity in new merchandise and facility enhancements. With $260.1 million in money and $270 million obtainable underneath its credit score facility, Common is well-positioned to optimize its tobacco enterprise and broaden its Elements operations. CEO Preston Wigner emphasised sustainability as a aggressive benefit, with the 2024 Sustainability Report highlighting provide chain resilience and farmer assist, aiming to drive long-term worth regardless of tariff dangers.

Progress Prospects

Because the world’s largest exporter and importer of leaf tobacco, Common Company presents a dimension and scale that rivals can’t match.

Because of this the corporate can depend amongst its prospects the biggest tobacco product producers on this planet.

Supply: Investor Presentation

Six of Common Company’s high prospects are among the many world’s largest tobacco producers. These firms management greater than four-fifths of the worldwide tobacco market.

Greater than 60% of Common Company’s annual income often comes from these prospects. Counting essentially the most distinguished names within the sector as prospects seemingly signifies that the overwhelming majority of revenues will be relied upon to be secure. This provides the corporate stability and reassures shareholders that the enterprise will be sustainable.

Common Company additionally strives to supply most of its gross sales to fulfill anticipated demand. Because of this the corporate targets its stock to prospects with dedicated gross sales orders. This permits Common Company to keep away from being caught holding merchandise or being pressured to promote at a cheaper price to cut back stock.

Lastly, as smoking charges decline within the U.S. and elsewhere, firms within the tobacco sector should work out different methods to develop income.

Supply: Investor Presentation

Common Company is making an attempt to just do that. The corporate made its first such acquisition earlier in 2020 when it added FruitSmart Inc. to its portfolio—FruitSmart processes fruit and vegetable components, advertising them to prospects worldwide.

Subsequent, Common acquired Silva Worldwide, a privately held firm specializing within the processing of dehydrated greens, fruits, and herbs. Silva procures greater than 60 forms of dehydrated greens, fruits, and herbs from over 20 nations worldwide.

The corporate continues to make bolt-on acquisitions, akin to the acquisition of Shank’s Extracts, a privately held specialty ingredient, flavoring, and meals firm with a portfolio of over 2,400 extracts, distillates, pure flavors, and colours.

Diversifying the enterprise is a really prudent transfer, in our opinion, because the variety of people who smoke declines with every passing yr.

Aggressive Benefits & Recession Efficiency

Common Company’s chief enterprise tends to depend on a dependable shopper, although tobacco utilization has declined. Shoppers who do smoke are more likely to search out tobacco merchandise whatever the state of the economic system. This makes the enterprise dependable even in an unreliable time.

Whereas earnings progress has been weak lately, Common Company navigated the final recession very effectively. The corporate’s earnings-per-share earlier than, throughout, and after the Nice Recession are listed beneath:

2006 adjusted earnings-per-share: $3.48
2007 adjusted earnings-per-share: $4.02 (15.5% enhance)
2008 adjusted earnings-per-share: $4.32 (7.5% enhance)
2009 adjusted earnings-per-share: $5.68 (31.5% enhance)
2010 adjusted earnings-per-share: $5.30 (6.7% lower)
2011 adjusted earnings-per-share: $3.25 (38.7% lower)
2012 adjusted earnings-per-share: $4.66 (43.4% enhance)

Common Company’s earnings per share improved by greater than 41% from 2007 via 2009, throughout a difficult market atmosphere for a lot of firms.

Earnings per share didn’t begin to endure a steep decline till after the worst of the recession had handed. It’s price noting that the corporate has but to achieve its 2009 excessive for annual earnings per share.

Usually, we imagine that the comparatively resilient demand for tobacco leaves will proceed to provide comparatively strong outcomes for the corporate, even throughout difficult financial durations. This was demonstrated once more throughout each the COVID-19 pandemic in 2020 and the present difficult macroeconomic panorama.

Valuation & Anticipated Returns

Like all shares, Common Company’s complete returns will include dividend funds, earnings progress, and adjustments in valuation. Utilizing the annual dividend of $3.28, shares of Common Company yield 5.7%.

The dividend payout ratio has climbed steadily lately. It was 84% in fiscal 2023, however the projected payout ratio for this fiscal yr is extra affordable 71%. We don’t imagine a dividend lower is imminent, however we advise warning concerning the dividend. On the very least, dividend progress is more likely to stay weak till earnings progress accelerates.

As a result of firm’s comparatively weak efficiency by way of profitability during the last decade, we anticipate modest earnings progress of 1.5% yearly over the following 5 years. Nonetheless, this can positively contribute to shareholder returns.

Lastly, in our view, enlargement of the valuation a number of is just not unlikely. With an anticipated earnings per share of $4.60 for fiscal yr 2025, shares are buying and selling at a price-to-earnings ratio of 12.6. With our goal valuation of 13 instances earnings, a number of enlargement may add 1.0% yearly to returns over the following 5 years.

Subsequently, anticipated complete returns would include the next:

1.5% earnings progress
5.7% dividend yield
1.0% a number of enlargement

In complete, we count on annual returns of 8.2% over the following 5 years. This projection warrants a maintain score for Common Company. We word that the inventory has a sure degree of enchantment for revenue buyers because of the very excessive yield, even when dividend progress is more likely to stay muted.

Closing Ideas

Common Company is without doubt one of the newer additions to the Dividend Kings. There are solely 55 firms which have the required 50+ years of dividend progress to achieve membership into this unique group.

Common can also be a excessive dividend inventory, with a yield approaching 6%.

Whereas Common Company presents a excessive yield, it has additionally struggled to develop earnings for greater than a decade, which in flip has brought about the dividend progress charge to gradual significantly.

The corporate’s dividend progress has not been accompanied by earnings progress, leading to a better dividend payout ratio. The excellent news is that the anticipated payout ratio for the present fiscal yr is predicted to be decrease than in earlier years.

As well as, complete return potential earns Common Company a maintain score from Certain Dividend.