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This is Why Horizon Bancorp (HBNC) is a Great Dividend Stock

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Horizon Bancorp in Focus

Horizon Bancorp (HBNC) is headquartered in Michigan City, and is in the Finance sector. The stock has seen a price change of 5.52% since the start of the year. The bank holding company is paying out a dividend of $0.15 per share at the moment, with a dividend yield of 2.73% compared to the Banks - Northeast industry's yield of 2.16% and the S&P 500's yield of 1.39%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.60 is up 13.2% from last year. Over the last 5 years, Horizon Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 13.74%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Horizon Bancorp's current payout ratio is 26%. This means it paid out 26% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for HBNC for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.06 per share, representing a year-over-year earnings growth rate of 3%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that HBNC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).


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