United Overseas Bank's (SGX:U11) Dividend Will Be Increased To SGD0.88

United Overseas Bank Limited (SGX:U11) will increase its dividend from last year's comparable payment on the 23rd of August to SGD0.88. This takes the annual payment to 5.5% of the current stock price, which is about average for the industry.

Check out our latest analysis for United Overseas Bank

United Overseas Bank's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

United Overseas Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on United Overseas Bank's last earnings report, the payout ratio is at a decent 52%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 19.3% over the next 3 years. 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 dividend has gone from an annual total of SGD0.75 in 2014 to the most recent total annual payment of SGD1.76. This implies that the company grew its distributions at a yearly rate of about 8.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

We Could See United Overseas Bank's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that United Overseas Bank has been growing its earnings per share at 6.5% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

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. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for United Overseas Bank that investors should know about before committing capital to this stock. Is United Overseas Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.

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