United Security Bancshares (NASDAQ:UBFO) will pay a dividend of $0.11 on the 25th of October. This means the annual payment is 6.7% of the current stock price, which is above the average for the industry.

See our latest analysis for United Security Bancshares

United Security Bancshares' Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

United Security Bancshares has a good history of paying out dividends, with its current track record at 5 years. Past distributions do not necessarily guarantee future ones, but United Security Bancshares' payout ratio of 63% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next year, EPS could expand by 8.3% if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio will be 69%, which is in the range that makes us comfortable with the sustainability of the dividend.

United Security Bancshares Doesn't Have A Long Payment History

United Security Bancshares' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.20 in 2017 to the most recent total annual payment of $0.44. This means that it has been growing its distributions at 17% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

We Could See United Security Bancshares' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that United Security Bancshares has been growing its earnings per share at 8.3% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like United Security Bancshares' Dividend

Overall, we like to see the dividend staying consistent, and we think United Security Bancshares might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for United Security Bancshares you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated 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.

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