We Wouldn't Be Too Quick To Buy Universal Insurance Holdings, Inc. (NYSE:UVE) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Universal Insurance Holdings, Inc. (NYSE:UVE) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Universal Insurance Holdings' shares before the 11th of May in order to be eligible for the dividend, which will be paid on the 19th of May.

The company's next dividend payment will be US$0.16 per share, and in the last 12 months, the company paid a total of US$0.77 per share. Looking at the last 12 months of distributions, Universal Insurance Holdings has a trailing yield of approximately 4.9% on its current stock price of $15.58. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Universal Insurance Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Universal Insurance Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Universal Insurance Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see how much of its profit Universal Insurance Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Universal Insurance Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Universal Insurance Holdings has delivered an average of 8.5% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Get our latest analysis on Universal Insurance Holdings's balance sheet health here.

The Bottom Line

Is Universal Insurance Holdings worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Although, if you're still interested in Universal Insurance Holdings and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 3 warning signs for Universal Insurance Holdings and you should be aware of them before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.