United Bancorp's (NASDAQ:UBCP) Upcoming Dividend Will Be Larger Than Last Year's

United Bancorp, Inc. (NASDAQ:UBCP) has announced that it will be increasing 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 6.6%, providing a nice boost to shareholder returns.

View our latest analysis for United Bancorp

United Bancorp's Earnings Will Easily Cover The Distributions

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.

Over the next 3 years, EPS is forecast to expand by 10.3%. 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 has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was $0.28, compared to the most recent full-year payment of $0.81. 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

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. It's encouraging to see that United Bancorp has been growing its earnings per share at 14% a 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've picked out 3 warning signs for United Bancorp that investors should know about before committing capital to this stock. 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.