Last update on 2024-06-27

United Bankshares (UBSI) - Dividend Analysis (Final Score: 6/8)

United Bankshares (UBSI) Dividend Analysis: Performance and stability evaluated with a 6/8 final score using an 8-criteria scoring system.

Short Analysis - Dividend Score: 6

We're running United Bankshares (UBSI) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

United Bankshares (UBSI) was analyzed based on eight criteria to understand its dividend performance and stability. The stock has a solid dividend yield of 3.86%, above the industry's 2.76% average, indicating attractiveness for dividend investors. The Dividend Growth Rate over the past 20 years is a moderate 2.30%, which is lower than the desired 5%, less appealing for those seeking robust growth. The Payout Ratio averages at a healthy 61.86%, generally below the 65% benchmark, showing balanced earnings retention. EPS coverage of dividends remains strong, but cash flow coverage varied, dipping recently, which can be a concern. The company's dividends have been stable with minor fluctuations and have been paid consistently for over 25 years. However, UBSI hasn't shown reliability in stock repurchases, with an increasing number of shares over time.

Insights for Value Investors Seeking Stable Income

UBSI shows impressive dividend yield and stability, making it a worthy candidate for dividend-focused investors. The company has a consistent dividend history of over 25 years, although the growth rate is moderate. Potential investors should keep an eye on cash flow coverage as recent trends suggest volatility. The lack of regular stock repurchase programs may deter some investors. Overall, if consistent dividend income is your preference and you're okay with moderate growth, UBSI is a solid choice, but exercise caution regarding cash flow issues.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

The dividend yield represents a stock's annual dividend payments as a percentage of its current stock price. A higher dividend yield can be a sign of a company’s stability and profitability. Investors often look for companies with a higher dividend yield as it provides a better return on investment, compared to simply holding on to the stock. In this context, it is important to compare the dividend yield of United Bankshares with the industry average to gauge its relative attractiveness to investors.

United Bankshares (UBSI) has a current dividend yield of 3.8615%, significantly higher than the industry's average of 2.76%. This elevated yield indicates that UBSI provides a potentially better return for investors solely seeking dividend income compared to other players in the industry. Historically, UBSI's dividend yield has shown considerable fluctuations ranging from a high of 5.8588% in 2009 to a low of 2.6737% in 2004. In most years, UBSI consistently outperformed the industry's average yield. For instance, in 2009, during the financial crisis, the dividend yield of UBSI spiked to 5.8588% compared to the industry average of 2.9%, underscoring its strong payout even in turbulent times. Recently in 2020, UBSI's dividend yield again soared to 5.4012% in contrast to the industry average of 2.59%. Performance has been less pronounced since then but remains above average, with the latest yields at 3.8615% for UBSI and 2.76% for the industry in 2023. This persistent performance above the industry average highlights UBSI’s robust dividend policies and strong financial health. Thus, the trend is a good indicator for dividend-seeking investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate evaluates how much a company's dividend payments have increased over a specified period, in this case, 20 years.

United Bankshares (UBSI) has maintained a consistent Dividend Growth Rate of 2.30% over the last 20 years, with some fluctuations. The average dividend ratio is below the critical 5% mark, which indicates that the company's rate of dividend growth is relatively low. Although there are some spikes, notably in 2020 with a rate of 27.73%, these appear as outliers rather than a consistent trend. This trend of relatively low dividend growth indicates a cautious approach to increasing shareholder payouts. Therefore, the dividend growth rate is not particularly strong, which could be seen as a negative factor by income-focused investors looking for robust and steady dividend growth.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio is the percentage of earnings a company pays to its shareholders in the form of dividends, averaged over time. A payout ratio below 65% is generally considered healthy as it indicates that the company retains a substantial portion of its earnings to reinvest in its operations, fund growth, and weather economic downturns.

United Bankshares (UBSI) has had a fluctuating payout ratio over the past 20 years with an average of 61.864%. While there were some years where the payout ratio exceeded 65%, especially in 2009 and 2017, the overall average managed to stay below the 65% threshold. This is a positive sign, indicating that the bank generally maintains a balanced approach to rewarding its shareholders and retaining earnings for growth and stability. However, the higher ratios in certain years could signal periods of financial strain or increased dividend payouts not fully supported by earnings. Therefore, while the trend is good on average, the fluctuations warrant closer scrutiny.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings shows the company's ability to sustain its payouts without endangering its financial stability. This coverage ratio is crucial for investors seeking reliable dividend income.

Analyzing the Earnings Per Share (EPS) of United Bankshares (UBSI) against its Dividend Per Share (DPS) highlights the company's performance in ensuring dividends are well-covered by earnings. Over the past 21 years, the EPS has seen fluctuations but generally remained above $1.5, peaking at $2.8446 in 2021, while DPS showed a steady increase, from $1 in 2003 to $1.45 in 2023. The ratio of dividends covered by earnings has shown variability, moving from 54.1% in 2003 to 53.24% in 2023. During the financial crisis years (2008-2009), the coverage worsened with ratios of 75.5% and 72.8% due to decreased earnings. However, in more recent years like 2020, the coverage was strong at 72.7%, illustrating recovery. Although the past two years show a slight dip to around 51%, these figures are still within a safe range. This signifies the company’s ongoing capability to manage and sustain its dividend payouts. Despite the year-to-year fluctuations, UBSI maintains a healthier coverage ratio, underpinning its commitment to rewarding shareholders while securing financial stability. Overall, this trend is positive, reflecting both adaptability in difficult times and consistent long-term dividend strategy.

Dividends Well Covered by Cash Flow?

Cash flow coverage of dividends measures how well a company's free cash flow can cover its dividend payouts. This is crucial as it indicates the sustainability of dividend payments without the company needing to borrow funds or dip into cash reserves.

United Bankshares' free cash flow coverage of dividends shows varied results over the given timeframe. There were years where the dividends were well covered by free cash flow, particularly in 2009 with a coverage ratio of 1.034 and 2019 with a coverage ratio of 1.017. However, in recent years, the trend has been less reassuring, dipping as low as 0.259 in 2022. This suggests that while UBSI has historically managed to cover its dividends through cash flow, recent trends indicate a potential struggle. A ratio above 1 is considered healthy, so the recent drop below this threshold could imply less financial stability in maintaining dividend payments. Investors should monitor this trend closely, as continuous low coverage might necessitate a reassessment of the company’s dividend policy.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are a key criterion for income-focused investors seeking consistent cash flow. Fluctuations affect investor confidence.

Over the past 20 years, United Bankshares (UBSI) has managed to maintain relatively stable dividend payments per share. Reviewing the data, there are minor year-over-year increases almost each year, such as moving from $1.00 in 2003 to incremental figures like $1.02 in 2004 and $1.05 in 2005. This steady growth continued and resulted in $1.45 in 2023. However, a significant observation is the notable drop in 2019 to $1.37 from $1.75 in 2018, marking a decrease of about 21.7%. This dip suggests a temporary lapse in stability, though overall, the long-term trend demonstrates resilience. Despite this drop, UBSI showed capacity to rebound and entered subsequent years with marginal increases stabilizing again by 2023. This historic condition might raise some concerns for deeply risk-averse investors, but many might still find UBSI generally reliable given that it stabilized post-drop. Essentially, a minor demerit amid steadfast long-term performance.

Dividends Paid for Over 25 Years?

Examining whether a company has paid dividends consistently for over 25 years helps to evaluate its financial stability and commitment to returning value to shareholders.

United Bankshares, Inc. (UBSI) has paid dividends consistently for over 25 years, starting from $0.745 per share in 1998 to $1.45 per share in 2023. This remarkable consistency not only illustrates UBSI's long-term financial stability but also reflects a commitment to rewarding its shareholders. The incremental growth in dividends per share over the years indicates a reliable income stream for investors, which is a strong indication of the company's resilience and profitability. Consequently, this trend is highly favorable for outside investors and demonstrates UBSI's ability to generate sustainable earnings even during varying economic conditions.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate that a company is committed to returning value to its shareholders regularly. It also implies efficient capital allocation over time.

The trend for United Bankshares (UBSI) shows that the number of shares outstanding has generally increased over the last 20 years, rising from 42,620,568 in 2003 to 134,505,058 in 2023. The years with reliable stock repurchases were 2005, 2006, 2019, and 2023. Given the significant increase in the number of shares over the period, it indicates that share repurchases have not been a regular exercise for UBSI but rather sporadic. This trend is not favorable from a repurchase standpoint as it suggests the company might not be consistently prioritizing stock repurchases as a way to return value to shareholders.