Horizon Bancorp's (NASDAQ:HBNC) Upcoming Dividend Will Be Larger Than Last Year's

Horizon Bancorp, Inc. (NASDAQ:HBNC) will increase its dividend on the 22nd of April to US$0.15. This takes the dividend yield to 3.0%, which shareholders will be pleased with.

See our latest analysis for Horizon Bancorp

Horizon Bancorp's Payment Has Solid Earnings Coverage

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

Over the next year, EPS is forecast to expand by 5.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, 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 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. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Horizon Bancorp has impressed us by growing EPS at 20% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.