Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Hawthorn Bancshares, Inc. (NASDAQ:HWBK) has paid dividends to shareholders, and these days it yields 1.7%. Let’s dig deeper into whether Hawthorn Bancshares should have a place in your portfolio.
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5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Hawthorn Bancshares fare?
The company currently pays out 35% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality facing HWBK investors is that whilst it has continued to pay shareholders dividend, dividends are lower today, than they were a decade ago. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Compared to its peers, Hawthorn Bancshares produces a yield of 1.7%, which is on the low-side for Banks stocks.
Taking all the above into account, Hawthorn Bancshares is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HWBK’s future growth? Take a look at our free research report of analyst consensus for HWBK’s outlook.
- Valuation: What is HWBK worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HWBK is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.