Readers hoping to buy Universal Insurance Holdings, Inc. (NYSE:UVE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Universal Insurance Holdings' shares before the 9th of May in order to receive the dividend, which the company will pay on the 16th of May.

The company's next dividend payment will be US$0.16 per share, and in the last 12 months, the company paid a total of US$0.77 per share. Last year's total dividend payments show that Universal Insurance Holdings has a trailing yield of 3.1% on the current share price of US$25.24. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Universal Insurance Holdings has been able to grow its dividends, or if the dividend might be cut.

We've discovered 1 warning sign about Universal Insurance Holdings. View them for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Universal Insurance Holdings's payout ratio is modest, at just 27% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

See our latest analysis for Universal Insurance Holdings

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Universal Insurance Holdings's earnings per share have been growing at 12% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Universal Insurance Holdings has lifted its dividend by approximately 3.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Universal Insurance Holdings is keeping back more of its profits to grow the business.

Final Takeaway

Has Universal Insurance Holdings got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Universal Insurance Holdings more closely.

On that note, you'll want to research what risks Universal Insurance Holdings is facing. Case in point: We've spotted 1 warning sign for Universal Insurance Holdings you should be aware of.

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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.