United Overseas Insurance (SGX:U13) Has Affirmed Its Dividend Of S$0.085

United Overseas Insurance Limited's (SGX:U13) investors are due to receive a payment of S$0.085 per share on 23rd of August. This payment means that the dividend yield will be 3.0%, which is around the industry average.

See our latest analysis for United Overseas Insurance

United Overseas Insurance's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, United Overseas Insurance was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 1.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was S$0.15 in 2011, and the most recent fiscal year payment was S$0.21. This works out to be a compound annual growth rate (CAGR) of approximately 3.4% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, United Overseas Insurance's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, a consistent dividend is a good thing, and we think that United Overseas Insurance has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for United Overseas Insurance that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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