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

Home Bancorp, Inc. (NASDAQ:HBCP) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of May to $0.25. The payment will take the dividend yield to 3.0%, which is in line with the average for the industry.

See our latest analysis for Home Bancorp

Home Bancorp's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having paid out dividends for 8 years, Home Bancorp has a good history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 19% also shows that Home Bancorp is able to comfortably pay dividends.

EPS is set to fall by 5.3% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 23%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Home Bancorp Is Still Building Its Track Record

Home Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. 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. Home Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Home Bancorp has impressed us by growing EPS at 14% 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.

Home Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Home Bancorp is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Home Bancorp (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.