Hawthorn Bancshares' (NASDAQ:HWBK) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Hawthorn Bancshares, Inc. (NASDAQ:HWBK) has announced that it will be increasing its dividend on the 1st of October to US$0.15. This makes the dividend yield about the same as the industry average at 2.5%.

See our latest analysis for Hawthorn Bancshares

Hawthorn Bancshares' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Hawthorn Bancshares' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 22.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

Hawthorn Bancshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was US$0.13, compared to the most recent full-year payment of US$0.60. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Hawthorn Bancshares has been growing its earnings per share at 22% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Hawthorn Bancshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Hawthorn Bancshares management tenure, salary, and performance. We have also put together a list of global stocks with a solid dividend.

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