United Bancorp (NASDAQ:UBCP) Will Pay A Larger Dividend Than Last Year At $0.1575

United Bancorp, Inc.'s (NASDAQ:UBCP) dividend will be increasing from last year's payment of the same period to $0.1575 on 20th of September. This will take the annual payment to 5.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for United Bancorp

United Bancorp's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

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 38%, 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 27.8%. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.

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 2012, the annual payment back then was $0.56, compared to the most recent full-year payment of $0.77. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that United Bancorp has grown earnings per share at 16% per year over the past five years. United Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

United Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for United Bancorp that investors need to be conscious of moving forward. 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.