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The board of United Bancorp, Inc. (NASDAQ:UBCP) has announced that it will be paying its dividend of $0.1575 on the 20th of September, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.0%, which shareholders will be pleased with.
See our latest analysis for United Bancorp
United Bancorp's Payment Expected To Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
United Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 38%, which means that United Bancorp would be able to pay its last dividend without pressure on the balance sheet.
The next 3 years are set to see EPS grow by 27.8%. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $0.56 in 2012 to the most recent total annual payment of $0.77. This means that it has been growing its distributions at 3.2% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that United Bancorp has grown earnings per share at 16% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
United Bancorp Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for United Bancorp that investors should take into consideration. Is United Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.