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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see United Overseas Insurance Limited (SGX:U13) is about to trade ex-dividend in the next two 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. Accordingly, United Overseas Insurance investors that purchase the stock on or after the 1st of August will not receive the dividend, which will be paid on the 15th of August.
The company's upcoming dividend is S$0.085 a share, following on from the last 12 months, when the company distributed a total of S$0.21 per share to shareholders. Last year's total dividend payments show that United Overseas Insurance has a trailing yield of 2.9% on the current share price of S$7.34. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for United Overseas Insurance
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see United Overseas Insurance paying out a modest 33% of its earnings.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see United Overseas Insurance earnings per share are up 5.7% per annum over the last five years.
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. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.