Should You Buy United Bancorp, Inc. (NASDAQ:UBCP) For Its Upcoming Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that United Bancorp, Inc. (NASDAQ:UBCP) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, United Bancorp investors that purchase the stock on or after the 7th of March will not receive the dividend, which will be paid on the 20th of March.
The company's upcoming dividend is US$0.3225 a share, following on from the last 12 months, when the company distributed a total of US$0.83 per share to shareholders. Calculating the last year's worth of payments shows that United Bancorp has a trailing yield of 6.8% on the current share price of US$12.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for United Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. United Bancorp paid out a comfortable 41% of its profit last year.
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.
Click here to see how much of its profit United Bancorp paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, United Bancorp's earnings per share have been growing at 14% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, United Bancorp has lifted its dividend by approximately 11% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
From a dividend perspective, should investors buy or avoid United Bancorp? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, United Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while United Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for United Bancorp you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
