United Overseas Insurance's (SGX:U13) Dividend Will Be SGD0.125

United Overseas Insurance Limited (SGX:U13) has announced that it will pay a dividend of SGD0.125 per share on the 15th of May. Based on this payment, the dividend yield will be 3.5%, which is fairly typical for the industry.

View our latest analysis for United Overseas Insurance

United Overseas Insurance's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, United Overseas Insurance's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 4.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

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 SGD0.15 in 2014 to the most recent total annual payment of SGD0.21. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 4.2% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, United Overseas Insurance could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On United Overseas Insurance's Dividend

Overall, a consistent dividend is a good thing, and we think that United Overseas Insurance has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. To that end, United Overseas Insurance has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is United Overseas Insurance not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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