United Fire Group (NASDAQ:UFCS) Has Announced A Dividend Of $0.16
United Fire Group, Inc.'s (NASDAQ:UFCS) investors are due to receive a payment of $0.16 per share on 22nd of March. This makes the dividend yield 2.7%, which will augment investor returns quite nicely.
See our latest analysis for United Fire Group
United Fire Group's Distributions May Be Difficult To Sustain
If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though United Fire Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Assuming the trend of the last few years continues, EPS will grow by 9.6% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $0.72 in 2014, and the most recent fiscal year payment was $0.64. This works out to be a decline of approximately 1.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
United Fire Group Could Grow Its Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. United Fire Group has impressed us by growing EPS at 9.6% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.
Our Thoughts On United Fire Group's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Fire Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
