Home Point Capital Inc. (NASDAQ:HMPT) Will Pay A US$0.04 Dividend In Four Days

Home Point Capital Inc. (NASDAQ:HMPT) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Home Point Capital's shares on or after the 9th of March will not receive the dividend, which will be paid on the 24th of March.

The company's upcoming dividend is US$0.04 a share, following on from the last 12 months, when the company distributed a total of US$0.16 per share to shareholders. Last year's total dividend payments show that Home Point Capital has a trailing yield of 5.0% on the current share price of $3.23. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Home Point Capital has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Home Point Capital

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Home Point Capital is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Home Point Capital paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. From this perspective, we're disturbed to see earnings per share plunged 73% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.

Given that Home Point Capital has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Should investors buy Home Point Capital for the upcoming dividend? Home Point Capital's earnings per share are down sharply over the last year, although we note that it is paying out a low fraction of its earnings. Ordinarily we wouldn't be too concerned about a one-year decline, but the -73% drop in earnings per share is enough to make us think twice. It doesn't appear an outstanding opportunity, but could be worth a closer look.

If you're not too concerned about Home Point Capital's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For instance, we've identified 4 warning signs for Home Point Capital (1 is a bit concerning) you should be aware of.

If you're in the market for strong dividend payers, we recommend checking 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.