Horizon Bancorp (NASDAQ:HBNC) Is Paying Out A Dividend Of $0.16

Horizon Bancorp, Inc. (NASDAQ:HBNC) will pay a dividend of $0.16 on the 17th of October. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

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Horizon Bancorp's Earnings Will Easily Cover The Distributions

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. Taking data from its last earnings report, calculating for the company's payout ratio shows 54%, which means that Horizon Bancorp would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 54.7%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 44% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Horizon Bancorp

Horizon Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.231 in 2015, and the most recent fiscal year payment was $0.64. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. In the last five years, Horizon Bancorp's earnings per share has shrunk at approximately 6.8% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

An additional note is that the company has been raising capital by issuing stock equal to 15% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. 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.