Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see United Overseas Insurance Limited (SGX:U13) is about to trade ex-dividend in the next three days. You can purchase shares before the 30th of April in order to receive the dividend, which the company will pay on the 14th of May.

United Overseas Insurance’s next dividend payment will be S$0.13 per share. Last year, in total, the company distributed S$0.24 to shareholders. Calculating the last year’s worth of payments shows that United Overseas Insurance has a trailing yield of 3.3{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} on the current share price of SGD7.18. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether United Overseas Insurance has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for United Overseas Insurance

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. United Overseas Insurance paid out a comfortable 43{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} 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.

Click here to see how much of its profit United Overseas Insurance paid out over the last 12 months.

SGX:U13 Historic Dividend April 26th 2021

Have Earnings And Dividends Been Growing?

Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we’re not enthused to see that United Overseas Insurance’s earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. United Overseas Insurance has delivered 4.8{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} dividend growth per year on average over the past 10 years.

Final Takeaway

Should investors buy United Overseas Insurance for the upcoming dividend? Earnings per share have been flat in recent years, although United Overseas Insurance reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating United Overseas Insurance more closely.

In light of that, while United Overseas Insurance has an appealing dividend, it’s worth knowing the risks involved with this stock. In terms of investment risks, we’ve identified 1 warning sign with United Overseas Insurance and understanding them should be part of your investment process.

We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} yield and an upcoming dividend.

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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. 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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