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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 Fire Group, Inc. (NASDAQ:UFCS) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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 Fire Group's shares on or after the 30th of August, you won't be eligible to receive the dividend, when it is paid on the 13th of September.
The company's upcoming dividend is US$0.16 a share, following on from the last 12 months, when the company distributed a total of US$0.64 per share to shareholders. Based on the last year's worth of payments, United Fire Group has a trailing yield of 3.1% on the current stock price of US$20.47. If you buy this business for its dividend, you should have an idea of whether United Fire Group's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for United Fire Group
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. United Fire Group paid out a comfortable 44% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit United Fire Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see United Fire Group's earnings have been skyrocketing, up 74% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. United Fire Group's dividend payments per share have declined at 1.2% per year on average over the past 10 years, which is uninspiring.