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Here's What We Like About UBS Group AG's (VTX:UBSG) Upcoming Dividend

Simply Wall St

Readers hoping to buy UBS Group AG (VTX:UBSG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 5th of May will not receive the dividend, which will be paid on the 7th of May.

UBS Group's upcoming dividend is CHF0.36 a share, following on from the last 12 months, when the company distributed a total of CHF0.36 per share to shareholders. Based on the last year's worth of payments, UBS Group has a trailing yield of 3.4% on the current stock price of CHF10.34. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether UBS Group has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for UBS Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. UBS Group paid out a comfortable 28% 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 the company's payout ratio, plus analyst estimates of its future dividends.

SWX:UBSG Historical Dividend Yield May 3rd 2020

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. This is why it's a relief to see UBS Group earnings per share are up 6.9% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past eight years, UBS Group has increased its dividend at approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is UBS Group worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating UBS Group more closely.

In light of that, while UBS Group has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for UBS Group you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.