HMN Financial (NASDAQ:HMNF) Is Paying Out A Dividend Of $0.06

HMN Financial, Inc. (NASDAQ:HMNF) will pay a dividend of $0.06 on the 8th of March. This payment means the dividend yield will be 1.1%, which is below the average for the industry.

See our latest analysis for HMN Financial

HMN Financial's Dividend Forecasted To Be Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end.

Currently, HMN Financial does not yet have a history of paying dividends out, with this being its first year doing so. Based on HMN Financial's last earnings report however, the payout ratio is at a comfortable 13%, meaning that the company may be able to sustain this dividend for future years if it continues on this earnings trend.

Looking forward, earnings per share could rise by 12.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

HMN Financial Is Still Building Its Track Record

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. HMN Financial has impressed us by growing EPS at 12% per year over the past five years. HMN Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like HMN Financial's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for HMN Financial that investors should take into consideration. Is HMN 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.