United Bankshares, Inc. (NASDAQ:UBSI) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase United Bankshares' shares before the 10th of June in order to receive the dividend, which the company will pay on the 1st of July.
The company's next dividend payment will be US$0.35 per share, on the back of last year when the company paid a total of US$1.40 to shareholders. Last year's total dividend payments show that United Bankshares has a trailing yield of 3.6% on the current share price of $39.23. If you buy this business for its dividend, you should have an idea of whether United Bankshares's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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 Bankshares is paying out an acceptable 50% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at United Bankshares, with earnings per share up 7.1% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, United Bankshares has increased its dividend at approximately 1.6% a year on average.
The Bottom Line
Is United Bankshares worth buying for its dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
With that being said, if dividends aren't your biggest concern with United Bankshares, you should know about the other risks facing this business. To help with this, we've discovered 2 warning signs for United Bankshares (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.
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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