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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Union Bankshares, Inc. (NASDAQ:UNB) has paid a dividend to shareholders. It currently yields 2.7%. Should it have a place in your portfolio? Let's take a look at Union Bankshares in more detail.
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- 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 the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Union Bankshares fare?
Union Bankshares has a trailing twelve-month payout ratio of 76%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. UNB has increased its DPS from $1.12 to $1.24 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes UNB a true dividend rockstar.
In terms of its peers, Union Bankshares generates a yield of 2.7%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank Union Bankshares as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. There are three pertinent factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for UNB’s future growth? Take a look at our free research report of analyst consensus for UNB’s outlook.
- Valuation: What is UNB 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 UNB 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.