Important news for shareholders and potential investors in Home Bancorp Inc (NASDAQ:HBCP): The dividend payment of US$0.20 per share will be distributed to shareholders on 16 November 2018, and the stock will begin trading ex-dividend at an earlier date, 02 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Home Bancorp’s latest financial data to analyse its dividend characteristics.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it the top 25% annual dividend yield payer?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Can it afford to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Home Bancorp fit our criteria?
The current trailing twelve-month payout ratio for the stock is 21%, which means that the dividend is covered by earnings. Going forward, analysts expect HBCP’s payout to increase to 25% of its earnings, which leads to a dividend yield of around 2.0%. Moreover, EPS should increase to $3.41. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Home Bancorp as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Home Bancorp produces a yield of 2.0%, which is on the low-side for Mortgage stocks.
Taking all the above into account, Home Bancorp is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for HBCP’s future growth? Take a look at our free research report of analyst consensus for HBCP’s outlook.
Valuation: What is HBCP 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 HBCP 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 email@example.com.