United Security Bancshares' (NASDAQ:UBFO) Dividend Will Be US$0.11

The board of United Security Bancshares (NASDAQ:UBFO) has announced that it will pay a dividend of US$0.11 per share on the 18th of April. Based on this payment, the dividend yield on the company's stock will be 5.3%, which is an attractive boost to shareholder returns.

View our latest analysis for United Security Bancshares

United Security Bancshares' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, United Security Bancshares was paying out 74% of earnings, but a comparatively small 49% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Earnings per share could rise by 6.3% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 85% which is a bit high but can definitely be sustainable.

United Security Bancshares Doesn't Have A Long Payment History

It is great to see that United Security Bancshares has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the first annual payment was US$0.20, compared to the most recent full-year payment of US$0.44. This means that it has been growing its distributions at 17% per annum over that time. United Security Bancshares has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

United Security Bancshares Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. United Security Bancshares has seen EPS rising for the last five years, at 6.3% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On United Security Bancshares' Dividend

Overall, we think United Security Bancshares is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for United Security Bancshares 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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