Dividend Kings In Focus: United Bankshares

Printed by Bob Ciura on November 14th, 2023

The Dividend Kings are an illustrious group of corporations. These corporations stand other than the overwhelming majority of the market as they’ve raised dividends for at the very least 50 consecutive years.

We consider that traders ought to view the Dividend Kings as essentially the most high-quality dividend progress shares to purchase for the long run.

With this in thoughts, we created a full record of all of the Dividend Kings. You may obtain the complete record, together with essential monetary metrics corresponding to dividend yields and price-to-earnings ratios, by clicking the hyperlink beneath:

This group is so unique that there are simply 53 corporations that qualify as a Dividend King. United Bankshares (UBSI) just lately elevated its dividend for the fiftieth consecutive yr, becoming a member of the record of Dividend Kings.

This text will talk about the corporate’s enterprise overview, progress prospects, aggressive benefits, and anticipated returns.

Enterprise Overview

United Bankshares was fashioned in 1982 and since that point, has acquired greater than 30 separate banking establishments. This deal with acquisitions, along with natural progress, has allowed United to develop right into a regional powerhouse within the Mid-Atlantic with about $29 billion in whole property, and annual income of about $1 billion.

United posted third quarter earnings on October twenty fifth, 2023, and outcomes had been considerably weaker than anticipated. Earnings-per-share got here to 71 cents. Income was $262 million, off 4.1% year-over-year. Web curiosity earnings was up $992 thousand, or lower than 1%, from this yr’s Q2.

Supply: Investor Presentation

Q3 outcomes benefited from rising market rates of interest on incomes property, a change within the asset combine to increased incomes property, and decrease common balances of long-term borrowings. This was partially offset by increased curiosity expense, which was pushed by the influence of deposit price balances.

The yield on common incomes property rose 19 foundation factors to five.52%. Web curiosity margin of three.54% was a rise of three foundation factors from Q2. Provisions for credit score losses had been $5.9 million, down from $11.4 million for Q2. The decrease quantity of provisions had been attributable to changes on assumptions of future macroeconomic circumstances, partially offset by further bills accrued attributable to mortgage progress.

Development Prospects

Earnings-per-share have been flat for just a few years now, as the corporate has struggled with translating asset and mortgage progress into earnings. We now see -2% annual earnings progress. We word the comparatively excessive base in earnings for 2023 as making future progress tougher.

United has all the time grown by way of acquisition, and we don’t consider that can change. Nevertheless, its internet curiosity margin goes to be in danger within the coming quarters because the speedy decline in charges in 2020 produced an enormous decline in the price of funds. Charges moved favorably for banks in 2021, and moved sharply increased in 2022.

Assuming charges stay elevated, United will likely be topic to probably a lot increased funding prices, which is able to see its NIM deteriorate if it can’t produce commensurate beneficial properties in lending yields. Lending margins rose fractionally in Q3, which is a optimistic flip from Q2 outcomes.

Aggressive Benefits & Recession Efficiency

United’s aggressive benefit is in its robust market place within the areas it serves. It’s headquartered in West Virginia the place competitors is comparatively gentle, and it’s increasing into extra densely populated areas like northern Virginia.

That doesn’t make it immune from recessions, however its efficiency in 2008 and 2009 was exemplary, and held up in very difficult circumstances in 2020, and thrived in 2021.

Under are the corporate’s earnings-per-share outcomes throughout, and after, the Nice Recession:

2007 earnings-per-share: $1.32
2008 earnings-per-share: $1.52 (15% enhance)
2009 earnings-per-share: $1.51 (~1% lower)
2010 earnings-per-share: $1.81 (20% enhance)

The corporate grew its diluted earnings-per-share in 2008, adopted by only a minor decline in 2009, which was the worst of the recession. Fortis then shortly rebounded with 20% earnings progress in 2010.

Valuation & Anticipated Whole Returns

We anticipate United Bankshares to generate earnings-per-share of $2.80 for 2023. On the present share worth, UBSI inventory trades for a price-to-earnings ratio of 11.9.

We see honest worth at 12 occasions earnings, given the place peer valuations are at current. We see elevated threat for United given the comparatively weak efficiency traditionally of the corporate’s internet curiosity margin and we expect traders pays barely much less for the inventory because of this. Shares are barely undervalued in the meanwhile.

An increasing P/E a number of may increase annual returns by 0.2% over the subsequent 5 years. Dividends can even increase shareholder returns. UBSI inventory yields 4.5% proper now.

These returns will likely be offset by anticipated EPS decline of two% per yr by way of 2028. Subsequently, UBSI is anticipated to return 2.7% yearly by way of 2028. This can be a comparatively weak anticipated price of return, making UBSI inventory a maintain.

Last Ideas

United is now anticipated to supply 2.7% annual returns within the coming years. The yield is engaging at 4.5% and will stay protected for years to come back, so United might be price a search for earnings traders.

Shares earn a maintain score as we see the street forward being very powerful from a progress perspective for a wide range of causes, however the inventory is affordable and has a sexy yield.

The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend progress traders: