United Bankshares (NASDAQ:UBSI) Has Re-Affirmed Its Dividend Of US$0.35

United Bankshares, Inc. (NASDAQ:UBSI) will pay a dividend of US$0.35 on the 1st of July. This makes the dividend yield 3.4%, which will augment investor returns quite nicely.

View our latest analysis for United Bankshares

United Bankshares' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment was quite easily covered by earnings, but it made up 101% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to fall by 4.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 53%, which we are pretty comfortable with and we think is feasible on an earnings basis.

United Bankshares Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$1.20 in 2011, and the most recent fiscal year payment was US$1.40. This works out to be a compound annual growth rate (CAGR) of approximately 1.6% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

United Bankshares Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. United Bankshares has seen EPS rising for the last five years, at 7.1% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, United Bankshares has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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