Readers hoping to buy Hilltop Holdings Inc. (NYSE:HTH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 14th of August to receive the dividend, which will be paid on the 30th of August.
Hilltop Holdings’s next dividend payment will be US$0.08 per share. Last year, in total, the company distributed US$0.32 to shareholders. Calculating the last year’s worth of payments shows that Hilltop Holdings has a trailing yield of 1.4% on the current share price of $22.48. 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 check whether the dividend payments are covered, and if earnings are growing.
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. Hilltop Holdings has a low and conservative payout ratio of just 18% of its income after tax.
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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re encouraged by the steady growth at Hilltop Holdings, with earnings per share up 3.7% on average 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. Hilltop Holdings has delivered 10% dividend growth per year on average over the past 3 years. 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
Is Hilltop Holdings an attractive dividend stock, or better left on the shelf? Hilltop Holdings 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. Hilltop Holdings ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Ever wonder what the future holds for Hilltop Holdings? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.