Union Bankshares' (NASDAQ:UNB) Dividend Will Be $0.36

Union Bankshares, Inc. (NASDAQ:UNB) has announced that it will pay a dividend of $0.36 per share on the 6th of February. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Union Bankshares

Union Bankshares' Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Having distributed dividends for at least 10 years, Union Bankshares has a long history of paying out a part of its earnings to shareholders. Based on Union Bankshares' last earnings report, the payout ratio is at a decent 74%, meaning that the company is able to pay out its dividend with a bit of room to spare.

If the trend of the last few years continues, EPS will grow by 3.1% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

Union Bankshares Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $1.04, compared to the most recent full-year payment of $1.44. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Union Bankshares May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Union Bankshares has only grown its earnings per share at 3.1% per annum over the past five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

We Really Like Union Bankshares' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Union Bankshares stock. Is Union Bankshares 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.