Readers hoping to buy United Overseas Insurance Limited (SGX:U13) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase United Overseas Insurance's shares before the 2nd of August to receive the dividend, which will be paid on the 16th of August.

The company's next dividend payment will be S$0.085 per share, on the back of last year when the company paid a total of S$0.17 to shareholders. Last year's total dividend payments show that United Overseas Insurance has a trailing yield of 2.7% on the current share price of SGD6.23. If you buy this business for its dividend, you should have an idea of whether United Overseas Insurance's dividend is reliable and sustainable. As a result, readers should always check whether United Overseas Insurance has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for United Overseas Insurance

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see United Overseas Insurance paying out a modest 48% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit United Overseas Insurance paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. United Overseas Insurance's earnings per share have fallen at approximately 8.0% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. United Overseas Insurance has delivered 1.3% dividend growth per year on average over the past 10 years.

To Sum It Up

From a dividend perspective, should investors buy or avoid United Overseas Insurance? United Overseas Insurance's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It doesn't appear an outstanding opportunity, but could be worth a closer look.

However if you're still interested in United Overseas Insurance as a potential investment, you should definitely consider some of the risks involved with United Overseas Insurance. For example, United Overseas Insurance has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.