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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Home Bancorp, Inc. (NASDAQ:HBCP) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 6th of November in order to be eligible for this dividend, which will be paid on the 20th of November.
Home Bancorp's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Based on the last year's worth of payments, Home Bancorp has a trailing yield of 3.5% on the current stock price of $25.24. If you buy this business for its dividend, you should have an idea of whether Home Bancorp's dividend is reliable and sustainable. As a result, readers should always check whether Home Bancorp has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Home Bancorp paying out a modest 39% of its earnings.
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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Home Bancorp, with earnings per share up 8.4% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Home Bancorp has delivered an average of 21% per year annual increase in its dividend, based on the past six years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Is Home Bancorp worth buying for its dividend? Home Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Home Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Home Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Home Bancorp you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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