Union Bankshares, Inc. (NASDAQ:UNB) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 24th of January to receive the dividend, which will be paid on the 6th of February.
Union Bankshares's next dividend payment will be US$0.32 per share, and in the last 12 months, the company paid a total of US$1.24 per share. Based on the last year's worth of payments, Union Bankshares stock has a trailing yield of around 3.4% on the current share price of $36.48. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Union Bankshares can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Union Bankshares is paying out an acceptable 74% of its profit, a common payout level among most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Union Bankshares's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, Union Bankshares has lifted its dividend by approximately 1.0% a year on average.
The Bottom Line
Is Union Bankshares an attractive dividend stock, or better left on the shelf? Union Bankshares's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.
Keen to explore more data on Union Bankshares's financial performance? Check out our visualisation of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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