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UMB Financial Corporation (NASDAQ:UMBF) has announced that it will pay a dividend of $0.37 per share on the 3rd of October. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.
UMB Financial's Dividend Forecasted To Be Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive.
Having distributed dividends for at least 10 years, UMB Financial has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, UMB Financial's payout ratio sits at 17%, an extremely comfortable number that shows that it can pay its dividend.
Over the next year, EPS is forecast to fall by 5.3%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 19%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.
UMB Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.82 in 2012 to the most recent total annual payment of $1.48. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. UMB Financial has seen EPS rising for the last five years, at 20% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for UMB Financial's prospects of growing its dividend payments in the future.
UMB Financial Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think UMB Financial might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for UMB Financial that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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