Don't Buy United Fire Group, Inc. (NASDAQ:UFCS) For Its Next Dividend Without Doing These Checks
United Fire Group, Inc. (NASDAQ:UFCS) stock is about to trade ex-dividend in three 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, United Fire Group investors that purchase the stock on or after the 30th of November will not receive the dividend, which will be paid on the 15th of December.
The company's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Based on the last year's worth of payments, United Fire Group stock has a trailing yield of around 3.0% on the current share price of $21.02. If you buy this business for its dividend, you should have an idea of whether United Fire Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for United Fire Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. United Fire Group reported a loss last year, so it's not great to see that it has continued paying a dividend.
Click here to see how much of its profit United Fire Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. United Fire Group reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. United Fire Group has delivered an average of 0.6% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Remember, you can always get a snapshot of United Fire Group's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
Should investors buy United Fire Group for the upcoming dividend? It's hard to get used to United Fire Group paying a dividend despite reporting a loss over the past year. 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.
With that being said, if you're still considering United Fire Group as an investment, you'll find it beneficial to know what risks this stock is facing. For example - United Fire Group has 1 warning sign we think you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
