United Bancorp (NASDAQ:UBCP) Is Increasing Its Dividend To $0.165

United Bancorp, Inc. (NASDAQ:UBCP) will increase its dividend from last year's comparable payment on the 20th of June to $0.165. This will take the dividend yield to an attractive 6.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for United Bancorp

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

United Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on United Bancorp's last earnings report, the payout ratio is at a decent 41%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 18.0% over the next 3 years. Analysts estimate the future payout ratio will be 39% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was $0.28, compared to the most recent full-year payment of $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. United Bancorp has impressed us by growing EPS at 15% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

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 2 warning signs for United Bancorp that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.