Last update on 2024-06-27

UMB Financial (UMBF) - Dividend Analysis (Final Score: 6/8)

UMB Financial's (UMBF) dividend policy scored 6/8 in performance stability analysis, covering yield, growth, payout ratio, earnings coverage, and more.

Short Analysis - Dividend Score: 6

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

The dividend analysis evaluates UMB Financial (UMBF) based on an 8-criteria scoring system, providing a dividend score of 6. Although UMBF has shown promising growth in absolute dividend values over 20 years, its dividend yield (1.8312%) is below the industry average of 2.76%, which may not attract income-focused investors. Despite uneven annual growth figures, its positive average annual dividend growth of 6.6575% showcases robust growth potential. Notably, UMBF has maintained a conservative payout ratio (average of 29.07%), ensuring dividend stability. While recent trends indicate a decline in dividend coverage by cash flow, UMBF has paid uninterrupted dividends for over 25 years and exhibits steady dividend growth and stable payouts. However, stock repurchases have been inconsistent, suggesting moderate shareholder returns in this area.

Insights for Value Investors Seeking Stable Income

Given UMB Financial's (UMBF) robust history of dividend growth, consistent payments over 25 years, and conservative payout ratio, it appears to be a reliable choice for long-term investors seeking stability and growth. However, the below-average dividend yield and inconsistent stock repurchases might give cautious income-focused investors pause. Improvements in dividend coverage by cash flows and more consistent share repurchases could enhance its attractiveness. Overall, UMBF is worth considering for those prioritizing dividend growth and stability.

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?

Dividend yield measures the annual dividend payment relative to the stock’s price. It reflects the return on investment for shareholders. A higher yield typically indicates a potentially higher income stream from dividends.

UMB Financial's (UMBF) dividend yield of 1.8312% is below the industry average of 2.76%.Over the past 20 years, the company's dividend yield has fluctuated between a low of 1.3005% (2021) and a high of 2.1208% (2011). The yield has generally trailed the industry average, except for a few years during the 2008-2010 economic downturn. The recent yield is not particularly competitive within the industry, suggesting that UMBF might be less attractive to income-focused investors.What is appealing is the generally increasing trend in the absolute dividend per share numbers, growing from $0.405 in 2003 to $1.53 in 2023, an overall factor increase of 3.78 over two decades. This indicates strong dividend growth, even if it doesn’t translate into a high yield due to the rapidly rising share price (+3.5x over 20 years).

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments over a period. Investors typically prefer companies that exhibit solid and consistent dividend growth.

The Dividend Growth Rate for UMB Financial (UMBF) over the past 20 years shows mixed results. The average dividend per share ratio of 6.6575% indicates a healthy increase overall. However, the individual annual figures display considerable volatility, with ratios ranging from as low as 2.68% to highs upwards of 13.19%. The trend doesn't suggest a consistent growth pattern but proves to be generally positive with some notable spikes. Thus, while UMBF maintains a decent average, the variability might concern more cautious dividend investors.

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

Assessing the payout ratio below 65% over the past two decades is key for evaluating UMB Financial's dividend sustainability.

Examining the data, UMB Financial (UMBF) has consistently maintained an average payout ratio of 29.07%, well below the critical 65% threshold. This signifies that the company prudently balances profit retention with shareholder returns. Highlights include a peaks of 43.15% in 2004 and a trough of 16.69% in 2022, indicating stable and cautious financial management to sustain or grow dividends. Such conservative payout strategies so far seem encouraging for future dividend reliability, benefiting investors leaning toward long-term growth and income stability.

Dividends Well Covered by Earnings?

Explain the criterion for UMB Financial (UMBF) and why it is important to consider

Dividends being well covered by earnings means that the company's earnings per share (EPS) should be significantly higher than the dividends paid per share (DPS). This ensures that the company generates sufficient profit to support its dividend payments, which is crucial for the sustainability and stability of dividends.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicate a company's ability to sustain its dividend payments. This is important for assessing stability and future growth potential.

Examining UMB Financial's figures over the past 21 years reveals a notable shift in its ability to cover dividends with free cash flow. In 2003, only 12.75% of free cash flow was allocated to dividends, which improved to a peak of 31.77% in 2005. However, a declining trend becomes evident, bottoming out at 10.03% in 2022 before recovering slightly to 16.66% in 2023. The healthiest range was around the mid-2000s to early 2010s, oscillating between 20% to 30%, showing a robust capacity to cover dividends. Though concerning, the lower values in recent years may be attributed to increased investments, repurchases, or financial strategies to sustain growth. It's critical for UMB Financial to improve this coverage ratio, focusing on strengthening cash flows while maintaining reasonable dividend payouts. Overall, a downward trend in recent coverage ratios merits caution for investors.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is crucial for income-seeking investors.

Over the past 20 years, UMB Financial (UMBF) has shown remarkable consistency in its dividend payouts, increasing most years and never dropping by more than 20%. The dividends per share have grown from $0.405 in 2003 to $1.53 in 2023, showing a steady upward trend with no significant declines. This consistent growth in dividend payments is an excellent indicator of the company’s financial health and profitability, making it highly attractive to income-seeking investors.

Dividends Paid for Over 25 Years?

Evaluating if UMB Financial (UMBF) has paid dividends consistently for over 25 years is crucial as it reflects the company's financial stability and shareholder value.

UMB Financial (UMBF) has demonstrated an impressive track record of paying dividends consecutively for over 25 years, starting from 1998 through 2023. The dividends per share have shown a consistent upward trend, starting at $0.3333 in 1998 and reaching $1.53 in 2023. This steady growth in dividends per share indicates a robust financial health and a commitment to returning value to shareholders. Moreover, the ability to sustain and increase dividends even during economically challenging periods, such as the financial crisis in 2008-2009 and the COVID-19 pandemic in 2020-2021, further underscores UMBF's resilience and prudent management. This performance is highly positive, signaling good prospects for current and potential investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate consistent capital return to shareholders, enhancing shareholder value.

Over the past 20 years, UMB Financial has shown a mixed trend in terms of stock repurchases. Out of the 20 years, the company repurchased shares in 11 years, indicating sporadic but present activities in terms of capital return to shareholders. This suggests a modest commitment to enhancing earnings per share and shareholder value. The average repurchase rate of 0.5767 is relatively low, indicating room for more shareholder-friendly actions. This trend can be seen as mildly positive but showcases potential for improvement in consistency.