Why You Might Be Interested In Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Accordingly, Home Bancshares (Conway AR) investors that purchase the stock on or after the 14th of November will not receive the dividend, which will be paid on the 6th of December.
The company's next dividend payment will be US$0.18 per share, on the back of last year when the company paid a total of US$0.72 to shareholders. Last year's total dividend payments show that Home Bancshares (Conway AR) has a trailing yield of 3.4% on the current share price of $21.06. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Home Bancshares (Conway AR)
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 34% of profit.
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?
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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Home Bancshares (Conway AR)'s earnings per share have been growing at 19% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Home Bancshares (Conway AR) has increased its dividend at approximately 19% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid Home Bancshares (Conway AR)? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Home Bancshares (Conway AR) appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
While it's tempting to invest in Home Bancshares (Conway AR) for the dividends alone, you should always be mindful of the risks involved. For example - Home Bancshares (Conway AR) has 1 warning sign we think you should be aware of.
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.
