Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Home Bancorp, Inc. (NASDAQ:HBCP) is about to trade ex-dividend in the next four days. You can purchase shares before the 6th of November in order to receive the dividend, which the company will pay on the 20th of November.
Home Bancorp's next dividend payment will be US$0.22 per share, on the back of last year when the company paid a total of US$0.88 to shareholders. Looking at the last 12 months of distributions, Home Bancorp has a trailing yield of approximately 3.5% on its current stock price of $25.24. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Home Bancorp has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see Home Bancorp paying out a modest 39% of its earnings.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Home Bancorp, with earnings per share up 8.4% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Home Bancorp has delivered an average of 21% per year annual increase in its dividend, based on the past six years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy Home Bancorp for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Home Bancorp more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Home Bancorp has 1 warning sign we think you should be aware of.
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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