United Community Banks (NYSE:UCB) Will Pay A Dividend Of $0.24

United Community Banks, Inc.'s (NYSE:UCB) investors are due to receive a payment of $0.24 per share on 4th of April. This payment means that the dividend yield will be 3.0%, which is around the industry average.

Check out our latest analysis for United Community Banks

United Community Banks' Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, United Community Banks has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 46%, which means that United Community Banks would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 46.4%. Analysts estimate the future payout ratio will be 37% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

United Community Banks Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.12 total annually to $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, United Community Banks' earnings per share has shrunk at approximately 2.4% per annum. 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, a consistent dividend is a good thing, and we think that United Community Banks has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.