Horizon Bancorp (NASDAQ:HBNC) Is Increasing Its Dividend To $0.16

Horizon Bancorp, Inc.'s (NASDAQ:HBNC) dividend will be increasing from last year's payment of the same period to $0.16 on 20th of January. This will take the dividend yield to an attractive 4.2%, providing a nice boost to shareholder returns.

See our latest analysis for Horizon Bancorp

Horizon Bancorp's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Horizon Bancorp has a long history of paying out a part of its earnings to shareholders. Based on Horizon Bancorp's last earnings report, the payout ratio is at a decent 29%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 9.8% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 36% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Horizon Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.142 total annually to $0.64. This means that it has been growing its distributions at 16% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Horizon Bancorp has impressed us by growing EPS at 18% per year over the past five years. Horizon Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Horizon Bancorp Looks Like A Great Dividend Stock

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 generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Horizon Bancorp that investors should know about before committing capital to this stock. Is Horizon 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.