United Bancorp (NASDAQ:UBCP) Is Due To Pay A Dividend Of $0.175

United Bancorp, Inc. (NASDAQ:UBCP) has announced that it will pay a dividend of $0.175 per share on the 20th of June. This will take the annual payment to 6.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for United Bancorp

United Bancorp's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

United Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on United Bancorp's last earnings report, the payout ratio is at a decent 42%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 19.9%. Analysts estimate the future payout ratio will be 40% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was $0.28, compared to the most recent full-year payment of $0.83. This means that it has been growing its distributions at 11% per annum over that time. United Bancorp has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. United Bancorp has seen EPS rising for the last five years, at 13% per annum. 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.

United Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that United Bancorp is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 2 warning signs for United Bancorp that you should be aware of before investing. Is United Bancorp 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.