Should You Buy Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) For Its Upcoming Dividend?

It looks like Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 29th of January, you won't be eligible to receive this dividend, when it is paid on the 15th of February.

Home Federal Bancorp of Louisiana's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.66 to shareholders. Last year's total dividend payments show that Home Federal Bancorp of Louisiana has a trailing yield of 2.2% on the current share price of $29.8054. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Home Federal Bancorp of Louisiana

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Home Federal Bancorp of Louisiana paid out a comfortable 28% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Home Federal Bancorp of Louisiana paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Home Federal Bancorp of Louisiana, with earnings per share up 6.5% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Home Federal Bancorp of Louisiana has increased its dividend at approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Home Federal Bancorp of Louisiana for the upcoming dividend? Home Federal Bancorp of Louisiana has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Home Federal Bancorp of Louisiana appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Home Federal Bancorp of Louisiana looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Home Federal Bancorp of Louisiana you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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