It looks like United Overseas Insurance Limited (SGX:U13) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase United Overseas Insurance's shares on or after the 21st of April, you won't be eligible to receive the dividend, when it is paid on the 5th of May.
The company's next dividend payment will be S$0.13 per share. Last year, in total, the company distributed S$0.21 to shareholders. Based on the last year's worth of payments, United Overseas Insurance stock has a trailing yield of around 3.1% on the current share price of SGD6.7. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether United Overseas Insurance has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for United Overseas Insurance
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. United Overseas Insurance paid out 62% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit United Overseas Insurance paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by United Overseas Insurance's 13% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, United Overseas Insurance has increased its dividend at approximately 3.4% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.