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Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Home Bancshares (Conway AR) investors that purchase the stock on or after the 17th of May will not receive the dividend, which will be paid on the 8th of June.
The company's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.66 to shareholders. Looking at the last 12 months of distributions, Home Bancshares (Conway AR) has a trailing yield of approximately 3.3% on its current stock price of $20.25. If you buy this business for its dividend, you should have an idea of whether Home Bancshares (Conway AR)'s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Home Bancshares (Conway AR)'s payout ratio is modest, at just 33% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Home Bancshares (Conway AR) earnings per share are up 7.2% per annum over the last 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 10 years, Home Bancshares (Conway AR) has lifted its dividend by approximately 26% 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 Home Bancshares (Conway AR) got what it takes to maintain its dividend payments? Home Bancshares (Conway AR) 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, Home Bancshares (Conway AR) looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of Home Bancshares (Conway AR)? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.