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Why United Community Banks (UCBI) is a Great Dividend Stock Right Now

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

United Community Banks in Focus

United Community Banks (UCBI - Free Report) is headquartered in Blairsville, and is in the Finance sector. The stock has seen a price change of 28.2% since the start of the year. Currently paying a dividend of $0.37 per share, the company has a dividend yield of 2.08%. In comparison, the Banks - Northeast industry's yield is 1.87%, while the S&P 500's yield is 1.38%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 5.6% from last year. In the past five-year period, United Community Banks has increased its dividend 4 times on a year-over-year basis for an average annual increase of 26.05%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. United Community Banks's current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.

UCBI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.34 per share, representing a year-over-year earnings growth rate of 18.18%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that UCBI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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