Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that United Fire Group, Inc. (NASDAQ:UFCS) is about to go ex-dividend in just four days. Ex-dividend means that investors that purchase the stock on or after the 3rd of September will not receive this dividend, which will be paid on the 18th of September.
United Fire Group’s next dividend payment will be US$0.33 per share, on the back of last year when the company paid a total of US$1.32 to shareholders. Based on the last year’s worth of payments, United Fire Group has a trailing yield of 5.1% on the current stock price of $25.92. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether United Fire Group has been able to grow its dividends, or if the dividend might be cut.
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’s dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. United Fire Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
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 Fire Group has increased its dividend at approximately 8.2% a year on average.
Remember, you can always get a snapshot of United Fire Group’s financial health, by checking our visualisation of its financial health, here.
To Sum It Up
Has United Fire Group got what it takes to maintain its dividend payments? First, it’s not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. United Fire Group doesn’t appear to have a lot going for it, and we’re not inclined to take a risk on owning it for the dividend.
Although, if you’re still interested in United Fire Group and want to know more, you’ll find it very useful to know what risks this stock faces. For example, we’ve found 1 warning sign for United Fire Group that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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