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It Might Be Better To Avoid Union Bankshares, Inc.'s (NASDAQ:UNB) Upcoming 0.9% Dividend

Simply Wall St

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 Union Bankshares, Inc. (NASDAQ:UNB) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 26th of July will not receive the dividend, which will be paid on the 8th of August.

Union Bankshares's next dividend payment will be US$0.31 per share. Last year, in total, the company distributed US$1.24 to shareholders. Based on the last year's worth of payments, Union Bankshares stock has a trailing yield of around 3.6% on the current share price of $34.18. 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 Union Bankshares has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Union Bankshares

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 78% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

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 how much of its profit Union Bankshares paid out over the last 12 months.

NasdaqGM:UNB Historical Dividend Yield, July 22nd 2019

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Union Bankshares's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Union Bankshares has delivered 1.0% dividend growth per year on average over the past 10 years.

The Bottom Line

Should investors buy Union Bankshares for the upcoming dividend? Union Bankshares's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. 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.

Curious about whether Union Bankshares has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.

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 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. Thank you for reading.