United Bancorp (NASDAQ:UBCP) Has Announced That It Will Be Increasing Its Dividend To US$0.30

The board of United Bancorp, Inc. (NASDAQ:UBCP) has announced that it will be increasing its dividend on the 18th of March to US$0.30. This will take the annual payment from 3.6% to 4.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for United Bancorp

United Bancorp's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, United Bancorp was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 8.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 56%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from US$0.56 in 2012 to the most recent annual payment of US$0.60. Dividend payments have grown at less than 1% a year over this period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see United Bancorp has been growing its earnings per share at 17% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for United Bancorp's prospects of growing its dividend payments in the future.

We Really Like United Bancorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for United Bancorp that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.