United Community Banks' (NYSE:UCB) Upcoming Dividend Will Be Larger Than Last Year's

The board of United Community Banks, Inc. (NYSE:UCB) has announced that it will be paying its dividend of $0.24 on the 4th of October, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

See our latest analysis for United Community Banks

United Community Banks' Earnings Will Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

United Community Banks has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but United Community Banks' payout ratio of 60% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 67.7% over the next 3 years. The future payout ratio could be 39% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

United Community Banks Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.12, compared to the most recent full-year payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that United Community Banks' earnings per share has fallen at approximately 6.8% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On United Community Banks' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for United Community Banks that investors should know about before committing capital to this stock. Is United Community Banks 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.