Investors who want to cash in on United Fire Group Inc’s (NASDAQ:UFCS) upcoming dividend of US$0.31 per share have only 4 days left to buy the shares before its ex-dividend date, 29 November 2018, in time for dividends payable on the 14 December 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine United Fire Group’s latest financial data to analyse its dividend characteristics.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does United Fire Group fit our criteria?
United Fire Group has a trailing twelve-month payout ratio of 38%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of UFCS it has increased its DPS from $0.60 to $1.24 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes UFCS a true dividend rockstar.
Relative to peers, United Fire Group produces a yield of 2.4%, which is on the low-side for Insurance stocks.
With this in mind, I definitely rank United Fire Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for UFCS’s future growth? Take a look at our free research report of analyst consensus for UFCS’s outlook.
- Valuation: What is UFCS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether UFCS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.