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It Might Not Be A Great Idea To Buy United Fire Group, Inc. (NASDAQ:UFCS) For Its Next Dividend

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Simply Wall St
·3 min read
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It looks like United Fire Group, Inc. (NASDAQ:UFCS) is about to go ex-dividend in the next three days. This means that investors who purchase shares on or after the 3rd of September will not receive the dividend, which will be paid on the 18th of September.

United Fire Group's next dividend payment will be US$0.33 per share. Last year, in total, the company distributed US$1.32 to shareholders. Looking at the last 12 months of distributions, United Fire Group has a trailing yield of approximately 5.1% on its current stock price of $25.92. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether United Fire Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for United Fire Group

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 Fire Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. United Fire Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, United Fire Group has lifted its dividend by approximately 8.2% a year on average.

We update our analysis on United Fire Group every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Has United Fire Group got what it takes to maintain its dividend payments? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that being said, if you're still considering United Fire Group as an investment, you'll find it beneficial to know what risks this stock is facing. For example - United Fire Group has 1 warning sign we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.