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Is United Bankshares (UBSI) a Good Pick for Income Investors?

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

United Bankshares in Focus

Headquartered in Charleston, United Bankshares (UBSI - Free Report) is a Finance stock that has seen a price change of 10.65% so far this year. The holding company for United Bank is paying out a dividend of $0.34 per share at the moment, with a dividend yield of 3.54% compared to the Banks - Southeast industry's yield of 1.16% and the S&P 500's yield of 1.77%.

Looking at dividend growth, the company's current annualized dividend of $1.36 is up 2.3% from last year. In the past five-year period, United Bankshares has increased its dividend 3 times on a year-over-year basis for an average annual increase of 1.57%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, United Bankshares's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, UBSI expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $2.51 per share, representing a year-over-year earnings growth rate of 32.11%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that UBSI is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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