Is United Community Banks, Inc. (NASDAQ:UCBI) An Attractive Dividend Stock?
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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, United Community Banks, Inc. (NASDAQ:UCBI) has paid a dividend to shareholders. It currently yields 2.6%. Should it have a place in your portfolio? Let's take a look at United Community Banks in more detail.
Check out our latest analysis for United Community Banks
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Does it pay an annual yield higher than 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does United Community Banks fit our criteria?
The company currently pays out 28% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect UCBI's payout to remain around the same level at 30% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.9%. Furthermore, EPS should increase to $2.26.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view United Community Banks as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, United Community Banks generates a yield of 2.6%, which is on the low-side for Banks stocks.
Next Steps:
If United Community Banks is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I've compiled three fundamental factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for UCBI’s future growth? Take a look at our free research report of analyst consensus for UCBI’s outlook.
Valuation: What is UCBI 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 UCBI is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
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.
