United Community Banks' (NASDAQ:UCBI) Upcoming Dividend Will Be Larger Than Last Year's
United Community Banks, Inc. (NASDAQ:UCBI) will increase its dividend on the 5th of October to US$0.20. Based on the announced payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.
View our latest analysis for United Community Banks
United Community Banks' Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, United Community Banks was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 4.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 36%, which we are pretty comfortable with and we think is feasible on an earnings basis.
United Community Banks Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The first annual payment during the last 7 years was US$0.12 in 2014, and the most recent fiscal year payment was US$0.80. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that United Community Banks has grown earnings per share at 19% per year over the past five years. United Community Banks definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like United Community Banks' Dividend
Overall, a dividend increase is always good, and we think that United Community Banks is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income 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. For example, we've picked out 1 warning sign for United Community Banks that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.
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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