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 Bankshares, Inc. (NASDAQ:UBSI) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 12th of September, you won't be eligible to receive this dividend, when it is paid on the 1st of October.
United Bankshares's next dividend payment will be US$0.34 per share, on the back of last year when the company paid a total of US$1.36 to shareholders. Last year's total dividend payments show that United Bankshares has a trailing yield of 3.7% on the current share price of $36.85. If you buy this business for its dividend, you should have an idea of whether United Bankshares's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. United Bankshares paid out 54% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. With that in mind, we're encouraged by the steady growth at United Bankshares, with earnings per share up 8.2% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, United Bankshares has increased its dividend at approximately 1.6% a year on average.
To Sum It Up
From a dividend perspective, should investors buy or avoid United Bankshares? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
Wondering what the future holds for United Bankshares? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.