United Overseas Bank Limited (SGX:U11) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of May to SGD1.17. This will take the dividend yield to an attractive 5.7%, providing a nice boost to shareholder returns.

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United Overseas Bank's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

United Overseas Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but United Overseas Bank's payout ratio of 51% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 21.3%. The future payout ratio could be 51% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

SGX:U11 Historic Dividend April 8th 2025

View our latest analysis for United Overseas Bank

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was SGD0.70, compared to the most recent full-year payment of SGD1.84. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

United Overseas Bank Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that United Overseas Bank has grown earnings per share at 6.9% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for United Overseas Bank that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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