Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see United Bancorp, Inc. (NASDAQ:UBCP) is about to trade ex-dividend in the next four days. You can purchase shares before the 9th of September in order to receive the dividend, which the company will pay on the 18th of September.
United Bancorp's next dividend payment will be US$0.14 per share, and in the last 12 months, the company paid a total of US$0.57 per share. Based on the last year's worth of payments, United Bancorp stock has a trailing yield of around 5.0% on the current share price of $11.3985. If you buy this business for its dividend, you should have an idea of whether United Bancorp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately United Bancorp's payout ratio is modest, at just 47% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see United Bancorp's earnings per share have risen 17% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. United Bancorp's dividend payments are broadly unchanged compared to where they were 10 years ago.
Is United Bancorp an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, United Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while United Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. For example - United Bancorp has 2 warning signs we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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