United Overseas Bank (SGX:U11) Is Due To Pay A Dividend Of SGD0.85

The board of United Overseas Bank Limited (SGX:U11) has announced that it will pay a dividend of SGD0.85 per share on the 9th of May. Based on this payment, the dividend yield for the company will be 5.6%, which is fairly typical for the industry.

View our latest analysis for United Overseas Bank

United Overseas Bank's Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having distributed dividends for at least 10 years, United Overseas Bank has a long history of paying out a part of its earnings to shareholders. Based on United Overseas Bank's last earnings report, the payout ratio is at a decent 51%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 10.6%. Analysts forecast the future payout ratio could be 50% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SGD0.60 in 2014, and the most recent fiscal year payment was SGD1.70. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. United Overseas Bank has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See United Overseas Bank's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that United Overseas Bank has grown earnings per share at 7.8% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On United Overseas Bank's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for United Overseas Bank that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.