Union Bankshares (NASDAQ:UNB) Has Announced That It Will Be Increasing Its Dividend To US$0.35

Union Bankshares, Inc. (NASDAQ:UNB) will increase its dividend on the 3rd of February to US$0.35. This will take the annual payment to 4.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Union Bankshares

Union Bankshares' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Union Bankshares' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 10.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$1.00 in 2012 to the most recent annual payment of US$1.40. This means that it has been growing its distributions at 3.4% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

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. Union Bankshares has impressed us by growing EPS at 11% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Union Bankshares' Dividend

Overall, a dividend increase is always good, and we think that Union Bankshares is a strong income stock thanks to its track record and growing earnings. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Union Bankshares management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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