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) (NASDAQ:HOMB) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 11th of August, you won’t be eligible to receive this dividend, when it is paid on the 2nd of September.
Home Bancshares (Conway AR)’s next dividend payment will be US$0.13 per share. Last year, in total, the company distributed US$0.52 to shareholders. Based on the last year’s worth of payments, Home Bancshares (Conway AR) has a trailing yield of 3.1% on the current stock price of $16.63. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Home Bancshares (Conway AR) can afford its dividend, and if the dividend could grow.
See our latest analysis for Home Bancshares (Conway AR)
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Home Bancshares (Conway AR)’s payout ratio is modest, at just 41% of profit.
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.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
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 fall far enough, the company could be forced to cut its dividend. This is why it’s a relief to see Home Bancshares (Conway AR) earnings per share are up 8.0% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Home Bancshares (Conway AR) has lifted its dividend by approximately 25% a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Home Bancshares (Conway AR) for the upcoming dividend? 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. We think this is a pretty attractive combination, and would be interested in investigating Home Bancshares (Conway AR) more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Home Bancshares (Conway AR) and you should be aware of this before buying any shares.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. 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.
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