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Be Sure To Check Out First United Corporation (NASDAQ:FUNC) Before It Goes Ex-Dividend

Simply Wall St

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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see First United Corporation (NASDAQ:FUNC) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 16th of July will not receive this dividend, which will be paid on the 1st of August.

First United's next dividend payment will be US$0.09 per share, and in the last 12 months, the company paid a total of US$0.36 per share. Last year's total dividend payments show that First United has a trailing yield of 1.8% on the current share price of $19.545. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for First United

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. First United is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit First United paid out over the last 12 months.

NasdaqGS:FUNC Historical Dividend Yield, July 12th 2019
NasdaqGS:FUNC Historical Dividend Yield, July 12th 2019

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see First United's earnings per share have risen 16% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. First United has seen its dividend decline 7.7% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Is First United worth buying for its dividend? Companies like First United that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, First United appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Curious about whether First United 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.