Horizon Bancorp's (NASDAQ:HBNC) Dividend Will Be Increased To US$0.16

Horizon Bancorp, Inc. (NASDAQ:HBNC) has announced that it will be increasing its dividend on the 22nd of July to US$0.16. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.

View our latest analysis for Horizon Bancorp

Horizon Bancorp's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Horizon Bancorp was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 7.0% over the next year. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Horizon Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was US$0.13, compared to the most recent full-year payment of US$0.60. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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. We are encouraged to see that Horizon Bancorp has grown earnings per share at 20% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Horizon Bancorp's prospects of growing its dividend payments in the future.

Horizon Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Horizon Bancorp is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 Horizon Bancorp analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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