UMB Financial (NASDAQ:UMBF) Has Announced That It Will Be Increasing Its Dividend To $0.39

The board of UMB Financial Corporation (NASDAQ:UMBF) has announced that it will be paying its dividend of $0.39 on the 2nd of January, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.2% is only a modest boost to shareholder returns.

Check out our latest analysis for UMB Financial

UMB Financial's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

UMB Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, UMB Financial's latest earnings report puts its payout ratio at 19%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 4.4% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 22% over the same time period, which we think the company can easily maintain.

UMB Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.86, compared to the most recent full-year payment of $1.56. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

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. UMB Financial has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like UMB Financial's Dividend

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. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for UMB Financial (of which 1 is significant!) you should know about. Is UMB Financial 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.