Attention dividend hunters! United Bankshares Inc (NASDAQ:UBSI) will be distributing its dividend of US$0.34 per share on the 01 October 2018, and will start trading ex-dividend in 3 days time on the 13 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into United Bankshares’s latest financial data to analyse its dividend attributes.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does United Bankshares pass our checks?
United Bankshares has a trailing twelve-month payout ratio of 69.9%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect UBSI’s payout to fall to 54.1% of its earnings, which leads to a dividend yield of 3.5%. However, EPS should increase to $2.54, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. UBSI has increased its DPS from $1.16 to $1.36 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, United Bankshares produces a yield of 3.5%, which is high for Banks stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, United Bankshares is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three essential aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for UBSI’s future growth? Take a look at our free research report of analyst consensus for UBSI’s outlook.
- Valuation: What is UBSI 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 UBSI 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.