In This Article:
United Overseas Bank Limited's (SGX:U11) dividend will be increasing from last year's payment of the same period to SGD1.17 on 13th of May. This takes the annual payment to 4.8% of the current stock price, which is about average for the industry.
See our latest analysis for United Overseas Bank
United Overseas Bank's Dividend Forecasted To Be Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Having distributed dividends for at least 10 years, United Overseas Bank has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 51%, which means that United Overseas Bank would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 21.4%. Analysts estimate the future payout ratio will be 50% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from SGD0.70 total annually to SGD1.84. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
We Could See United Overseas Bank's Dividend Growing
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that United Overseas Bank has been growing its earnings per share at 7.3% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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. Taking the debate a bit further, we've identified 1 warning sign for United Overseas Bank that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.