Horizon Bancorp (NASDAQ:HBNC) Is Due To Pay A Dividend Of $0.16

Horizon Bancorp, Inc. (NASDAQ:HBNC) has announced that it will pay a dividend of $0.16 per share on the 18th of April. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Horizon Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 79%, which means that Horizon Bancorp would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 152.2%. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 36% over the same time period, which would make us comfortable with the sustainability of the dividend.

See our latest analysis for Horizon Bancorp

Horizon Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.196 in 2015 to the most recent total annual payment of $0.64. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Horizon Bancorp's EPS has declined at around 12% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Horizon Bancorp's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Horizon Bancorp's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Horizon Bancorp that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.