Readers hoping to buy UMB Financial Corporation (NASDAQ:UMBF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 9th of March in order to be eligible for this dividend, which will be paid on the 1st of April.
UMB Financial's next dividend payment will be US$0.32 per share. Last year, in total, the company distributed US$1.28 to shareholders. Last year's total dividend payments show that UMB Financial has a trailing yield of 1.4% on the current share price of $89.5. If you buy this business for its dividend, you should have an idea of whether UMB Financial's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. UMB Financial has a low and conservative payout ratio of just 21% of its income after tax.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see UMB Financial's earnings have been skyrocketing, up 24% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, UMB Financial has lifted its dividend by approximately 5.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because UMB Financial is keeping back more of its profits to grow the business.
To Sum It Up
Is UMB Financial an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, UMB Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while UMB Financial has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for UMB Financial (of which 1 makes us a bit uncomfortable!) you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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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