United Community Banks (NASDAQ:UCBI) Has Announced That It Will Be Increasing Its Dividend To US$0.20

The board of United Community Banks, Inc. (NASDAQ:UCBI) has announced that it will be increasing its dividend on the 5th of January to US$0.20. This makes the dividend yield about the same as the industry average at 2.2%.

See our latest analysis for United Community Banks

United Community Banks' Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, United Community Banks was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 13.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is comfortable for the company to continue in the future.

United Community Banks Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2013, the first annual payment was US$0.12, compared to the most recent full-year payment of US$0.80. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see United Community Banks has been growing its earnings per share at 19% a year over the past five years. United Community Banks definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

United Community Banks Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 2 warning signs for United Community Banks that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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