Should Union Bankshares Corporation (NASDAQ:UBSH) Be Part Of Your Dividend Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Union Bankshares Corporation (NASDAQ:UBSH) has been paying a dividend to shareholders. Today it yields 3.3%. Does Union Bankshares tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Union Bankshares
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share amount increased over the past?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
How does Union Bankshares fare?
The company currently pays out 43% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 32% which, assuming the share price stays the same, leads to a dividend yield of 3.4%. However, EPS should increase to $2.67, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, Union Bankshares has a yield of 3.3%, which is high for Banks stocks but still below the market’s top dividend payers.
Next Steps:
Keeping in mind the dividend characteristics above, Union Bankshares is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for UBSH’s future growth? Take a look at our free research report of analyst consensus for UBSH’s outlook.
Valuation: What is UBSH worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether UBSH is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
