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The board of United Security Bancshares (NASDAQ:UBFO) has announced that it will pay a dividend of $0.11 per share on the 19th of January. The dividend yield will be 6.0% based on this payment which is still above the industry average.
View our latest analysis for United Security Bancshares
United Security Bancshares' Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
United Security Bancshares has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 55%shows that United Security Bancshares would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, earnings per share could rise by 9.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 58% by next year, which is in a pretty sustainable range.
United Security Bancshares Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.44. This means that it has been growing its distributions at 14% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
United Security Bancshares Could Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. United Security Bancshares has seen EPS rising for the last five years, at 9.7% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
United Security Bancshares Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for United Security Bancshares (1 is concerning!) that you should be aware of before investing. Is United Security Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.