United Community Banks (NASDAQ:UCBI) Is Paying Out A Larger Dividend Than Last Year

United Community Banks, Inc.'s (NASDAQ:UCBI) dividend will be increasing from last year's payment of the same period to $0.22 on 5th of October. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

Check out our latest analysis for United Community Banks

United Community Banks' Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for 8 years, United Community Banks has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 34%shows that United Community Banks would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 41.4%. The future payout ratio could be 27% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

United Community Banks Doesn't Have A Long Payment History

United Community Banks' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the dividend has gone from $0.12 total annually to $0.84. This means that it has been growing its distributions at 28% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

United Community Banks Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. United Community Banks has seen EPS rising for the last five years, at 8.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for United Community Banks' prospects of growing its dividend payments in the future.

We should note that United Community Banks has issued stock equal to 22% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like United Community Banks' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for United Community Banks that you should be aware of before investing. Is United Community Banks not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.