United Insurance Holdings (NASDAQ:UIHC) Is Due To Pay A Dividend Of US$0.06

The board of United Insurance Holdings Corp. (NASDAQ:UIHC) has announced that it will pay a dividend on the 16th of March, with investors receiving US$0.06 per share. This makes the dividend yield 6.6%, which will augment investor returns quite nicely.

View our latest analysis for United Insurance Holdings

United Insurance Holdings Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even in the absence of profits, United Insurance Holdings is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could 61.4% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was US$0.20 in 2012, and the most recent fiscal year payment was US$0.24. This means that it has been growing its distributions at 1.8% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. United Insurance Holdings' earnings per share has shrunk at 61% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

United Insurance Holdings' Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for United Insurance Holdings (1 makes us a bit uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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