Heritage Commerce (NASDAQ:HTBK) Is Due To Pay A Dividend Of $0.13
The board of Heritage Commerce Corp (NASDAQ:HTBK) has announced that it will pay a dividend on the 24th of August, with investors receiving $0.13 per share. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Heritage Commerce's stock price has increased by 43% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Heritage Commerce
Heritage Commerce's Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Heritage Commerce has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Heritage Commerce's payout ratio of 43% is a good sign as this means that earnings decently cover dividends.
Over the next year, EPS is forecast to fall by 10.9%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 54%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Heritage Commerce Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.12 in 2013, and the most recent fiscal year payment was $0.52. This means that it has been growing its distributions at 16% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Heritage Commerce has been growing its earnings per share at 19% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Heritage Commerce Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Heritage Commerce that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
