Home Bancorp's (NASDAQ:HBCP) Upcoming Dividend Will Be Larger Than Last Year's

The board of Home Bancorp, Inc. (NASDAQ:HBCP) has announced that it will be paying its dividend of $0.25 on the 17th of February, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 2.6%.

See our latest analysis for Home Bancorp

Home Bancorp's Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Home Bancorp has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Using data from its latest earnings report, Home Bancorp's payout ratio sits at 22%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to expand by 36.2%. The future payout ratio could be 20% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Home Bancorp Doesn't Have A Long Payment History

It is great to see that Home Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2015, the annual payment back then was $0.28, compared to the most recent full-year payment of $1.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Home Bancorp Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Home Bancorp has grown earnings per share at 9.5% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Home Bancorp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Home Bancorp that investors need to be conscious of moving forward. Is Home Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.