HBT Financial (NASDAQ:HBT) Will Pay A Larger Dividend Than Last Year At $0.17

HBT Financial, Inc. (NASDAQ:HBT) will increase its dividend from last year's comparable payment on the 16th of May to $0.17. The payment will take the dividend yield to 3.9%, which is in line with the average for the industry.

View our latest analysis for HBT Financial

HBT Financial's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

HBT Financial has a short history of paying out dividends, with its current track record at only 3 years. Based on HBT Financial's last earnings report, calculating for its payout ratio equates to 37%, which means that the company covered its last dividend with comfortable room to spare.

Looking forward, earnings per share is forecast to rise by 11.7% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 48% by next year, which is in a pretty sustainable range.

HBT Financial Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of $0.60 in 2020 to the most recent total annual payment of $0.68. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. HBT Financial's EPS has fallen by approximately 12% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

An additional note is that the company has been raising capital by issuing stock equal to 11% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On HBT Financial's Dividend

In summary, while it's always good to see the dividend being raised, we don't think HBT Financial's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for HBT Financial that you should be aware of before investing. Is HBT Financial 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.