Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Horizon Bancorp, Inc. (NASDAQ:HBNC) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 3rd of October will not receive this dividend, which will be paid on the 18th of October.
Horizon Bancorp's next dividend payment will be US$0.1 per share, and in the last 12 months, the company paid a total of US$0.5 per share. Looking at the last 12 months of distributions, Horizon Bancorp has a trailing yield of approximately 2.8% on its current stock price of $17.42. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Horizon Bancorp paid out a comfortable 31% of its profit last year.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Horizon Bancorp, with earnings per share up 5.8% 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. In the last ten years, Horizon Bancorp has lifted its dividend by approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Has Horizon Bancorp got what it takes to maintain its dividend payments? Horizon 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. Horizon 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.
Ever wonder what the future holds for Horizon Bancorp? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.