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Readers hoping to buy United Overseas Insurance Limited (SGX:U13) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase United Overseas Insurance's shares on or after the 5th of May, you won't be eligible to receive the dividend, when it is paid on the 16th of May.
The company's upcoming dividend is S$0.145 a share, following on from the last 12 months, when the company distributed a total of S$0.23 per share to shareholders. Based on the last year's worth of payments, United Overseas Insurance stock has a trailing yield of around 3.0% on the current share price of S$7.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether United Overseas Insurance can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately United Overseas Insurance's payout ratio is modest, at just 35% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Check out our latest analysis for United Overseas Insurance
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by United Overseas Insurance's 5.9% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, United Overseas Insurance has increased its dividend at approximately 3.1% a year on average.