Hilltop Holdings (NYSE:HTH) Could Be A Buy For Its Upcoming Dividend
Hilltop Holdings Inc. (NYSE:HTH) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Hilltop Holdings' shares on or after the 10th of August will not receive the dividend, which will be paid on the 25th of August.
The company's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Based on the last year's worth of payments, Hilltop Holdings has a trailing yield of 2.1% on the current stock price of $29.87. If you buy this business for its dividend, you should have an idea of whether Hilltop Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Hilltop Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hilltop Holdings paid out a comfortable 40% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Hilltop Holdings, with earnings per share up 2.7% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hilltop Holdings has delivered 15% dividend growth per year on average over the past seven years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Hilltop Holdings? Hilltop Holdings 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. Overall, Hilltop Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Hilltop Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Hilltop Holdings is showing 3 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
