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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Univest Financial Corporation (NASDAQ:UVSP) has paid dividends to shareholders, and these days it yields 3.2%. Should it have a place in your portfolio? Let's take a look at Univest Financial in more detail.
Here's how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is it paying an annual yield above 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has dividend per share risen in the past couple of years?
Is its earnings sufficient to payout dividend at the current rate?
Will it be able to continue to payout at the current rate in the future?
How well does Univest Financial fit our criteria?
Univest Financial has a trailing twelve-month payout ratio of 46%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect UVSP's payout to fall to 35% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.2%. However, EPS should increase to $2.14, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. UVSP investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
In terms of its peers, Univest Financial generates a yield of 3.2%, which is high for Banks stocks but still below the market's top dividend payers.
Considering the dividend attributes we analyzed above, Univest Financial is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. Below, I've compiled three pertinent factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for UVSP’s future growth? Take a look at our free research report of analyst consensus for UVSP’s outlook.
Valuation: What is UVSP 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 UVSP 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.