United Security Bancshares' (NASDAQ:UBFO) investors are due to receive a payment of $0.12 per share on 22nd of April. The dividend yield will be 5.3% based on this payment which is still above the industry average.

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United Security Bancshares' Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having paid out dividends for 8 years, United Security Bancshares has a good history of paying out a part of its earnings to shareholders. Based on United Security Bancshares' last earnings report, the payout ratio is at a decent 56%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS could fall by 0.9% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 62%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for United Security Bancshares

United Security Bancshares Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 8 years was $0.20 in 2017, and the most recent fiscal year payment was $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that United Security Bancshares' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On United Security Bancshares' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While United Security Bancshares is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on United Security Bancshares management tenure, salary, and performance. Is United Security Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.