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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hilltop Holdings Inc. (NYSE:HTH) is about to go ex-dividend in just four days. Ex-dividend means that investors that purchase the stock on or after the 13th of November will not receive this dividend, which will be paid on the 30th of November.
Hilltop Holdings's next dividend payment will be US$0.09 per share, on the back of last year when the company paid a total of US$0.36 to shareholders. Calculating the last year's worth of payments shows that Hilltop Holdings has a trailing yield of 1.6% on the current share price of $23.04. If you buy this business for its dividend, you should have an idea of whether Hilltop Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hilltop Holdings has a low and conservative payout ratio of just 8.9% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Hilltop Holdings's earnings have been skyrocketing, up 27% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last four years, Hilltop Holdings has lifted its dividend by approximately 11% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Has Hilltop Holdings got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. 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 Hilltop Holdings more closely.
On that note, you'll want to research what risks Hilltop Holdings is facing. Our analysis shows 2 warning signs for Hilltop Holdings that we strongly recommend you have a look at before investing in the company.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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