United Overseas Bank (SGX:U11) Has Announced A Dividend Of SGD0.85
United Overseas Bank Limited's (SGX:U11) investors are due to receive a payment of SGD0.85 per share on 9th of May. This will take the annual payment to 6.0% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for United Overseas Bank
United Overseas Bank's Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
United Overseas Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on United Overseas Bank's last earnings report, the payout ratio is at a decent 51%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next 3 years are set to see EPS grow by 12.7%. Analysts estimate the future payout ratio will be 49% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was SGD0.60, compared to the most recent full-year payment of SGD1.70. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. United Overseas Bank has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
We Could See United Overseas Bank's Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. United Overseas Bank has impressed us by growing EPS at 7.8% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Our Thoughts On United Overseas Bank's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for United Overseas Bank that investors should know about before committing capital to this stock. Is United Overseas Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.
