United Bancshares, Inc. (NASDAQ:UBOH) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see United Bancshares, Inc. (NASDAQ:UBOH) is about to trade ex-dividend in the next 2 days. Investors can purchase shares before the 25th of February in order to be eligible for this dividend, which will be paid on the 15th of March.

United Bancshares's next dividend payment will be US$0.16 per share, on the back of last year when the company paid a total of US$0.51 to shareholders. Based on the last year's worth of payments, United Bancshares stock has a trailing yield of around 2.1% on the current share price of $23.935. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for United Bancshares

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. United Bancshares has a low and conservative payout ratio of just 12% of its income after tax. United Bancshares paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit United Bancshares paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see United Bancshares's earnings per share have risen 19% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. United Bancshares has seen its dividend decline 1.6% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid United Bancshares? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating United Bancshares more closely.

On that note, you'll want to research what risks United Bancshares is facing. Every company has risks, and we've spotted 2 warning signs for United Bancshares you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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