UMB Financial's (NASDAQ:UMBF) Shareholders Will Receive A Bigger Dividend Than Last Year

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. Although the dividend is now higher, the yield is only 2.5%, which is below the industry average.

View our latest analysis for UMB Financial

UMB Financial's 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.

UMB Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, UMB Financial's payout ratio sits at 19%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to fall by 4.4%. Despite that, analysts estimate the future payout ratio could be 22% over the same time period, which is in a pretty comfortable range.

UMB Financial 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 annual payment during the last 10 years was $0.86 in 2013, and the most recent fiscal year payment was $1.56. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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 impressed us by growing EPS at 12% per year over the past five years. UMB Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

UMB Financial Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that UMB Financial is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, UMB Financial has 2 warning signs (and 1 which is a bit unpleasant) we think 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.

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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.