United Security Bancshares (NASDAQ:UBFO) Will Pay A Dividend Of $0.12

The board of United Security Bancshares (NASDAQ:UBFO) has announced that it will pay a dividend of $0.12 per share on the 25th of October. Based on this payment, the dividend yield on the company's stock will be 6.5%, which is an attractive boost to shareholder returns.

View our latest analysis for United Security Bancshares

United Security Bancshares' 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 Security Bancshares has a good history of paying out dividends, with its current track record at 6 years. Based on United Security Bancshares' last earnings report, the payout ratio is at a decent 37%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS could expand by 13.0% if recent trends continue. If the dividend continues on this path, the future payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

United Security Bancshares Is Still Building Its Track Record

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 annual payment back then was $0.20, compared to the most recent full-year payment of $0.48. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. 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.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that United Security Bancshares has been growing its earnings per share at 13% a year over the past five years. United Security Bancshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like United Security Bancshares' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for United Security Bancshares that you should be aware of before investing. Is United Security Bancshares 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.