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Is It Smart To Buy United Bancorp, Inc. (NASDAQ:UBCP) Before It Goes Ex-Dividend?

Simply Wall St
·3 mins read

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 Bancorp, Inc. (NASDAQ:UBCP) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 9th of September, you won't be eligible to receive this dividend, when it is paid on the 18th of September.

United Bancorp's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.57 to shareholders. Based on the last year's worth of payments, United Bancorp has a trailing yield of 5.0% on the current stock price of $11.3985. 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 Bancorp can afford its dividend, and if the dividend could grow.

Check out our latest analysis for United Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see United Bancorp paying out a modest 47% of its earnings.

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 United Bancorp paid out over the last 12 months.

historic-dividend
historic-dividend

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. Fortunately for readers, United Bancorp's earnings per share have been growing at 17% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. United Bancorp's dividend payments are effectively flat on where they were 10 years ago.

Final Takeaway

Is United Bancorp an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. United Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for United Bancorp you should know about.

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.

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.