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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see United Security Bancshares (NASDAQ:UBFO) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 7th of October in order to receive the dividend, which the company will pay on the 18th of October.
United Security Bancshares's upcoming dividend is US$0.1 a share, following on from the last 12 months, when the company distributed a total of US$0.4 per share to shareholders. Based on the last year's worth of payments, United Security Bancshares stock has a trailing yield of around 4.2% on the current share price of $10.36. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. United Security Bancshares paid out a comfortable 45% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, United Security Bancshares's earnings per share have been growing at 16% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, United Security Bancshares has increased its dividend at approximately 48% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Is United Security Bancshares worth buying for its dividend? Companies like United Security Bancshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, United Security Bancshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious about whether United Security Bancshares has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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 firstname.lastname@example.org. 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.