United Overseas Insurance Limited (SGX:U13) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase United Overseas Insurance's shares on or after the 21st of April, you won't be eligible to receive the dividend, when it is paid on the 5th of May.

The company's next dividend payment will be S$0.13 per share. Last year, in total, the company distributed S$0.21 to shareholders. Based on the last year's worth of payments, United Overseas Insurance stock has a trailing yield of around 3.1% on the current share price of SGD6.7. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether United Overseas Insurance can afford its dividend, and if the dividend could grow.

View our latest analysis for United Overseas Insurance

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. United Overseas Insurance is paying out an acceptable 62% of its profit, a common payout level among most companies.

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?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by United Overseas Insurance's 13% per annum decline in earnings in the past 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. In the past 10 years, United Overseas Insurance has increased its dividend at approximately 3.4% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

The Bottom Line

Should investors buy United Overseas Insurance for the upcoming dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in United Overseas Insurance despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, United Overseas Insurance has 2 warning signs (and 1 which is potentially serious) we think you should know about.

If you're in the market for strong dividend payers, we recommend checking 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.