Should You Buy Hawthorn Bancshares, Inc. (NASDAQ:HWBK) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hawthorn Bancshares, Inc. (NASDAQ:HWBK) is about to go ex-dividend in just four days. This means that investors who purchase shares on or after the 12th of March will not receive the dividend, which will be paid on the 1st of April.

Hawthorn Bancshares's next dividend payment will be US$0.13 per share, on the back of last year when the company paid a total of US$0.52 to shareholders. Calculating the last year's worth of payments shows that Hawthorn Bancshares has a trailing yield of 2.2% on the current share price of $23.5. If you buy this business for its dividend, you should have an idea of whether Hawthorn Bancshares's dividend is reliable and sustainable. So we need to investigate whether Hawthorn Bancshares can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hawthorn Bancshares

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. Hawthorn Bancshares paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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 Hawthorn Bancshares 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Hawthorn Bancshares's earnings per share have risen 11% per annum 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. Hawthorn Bancshares has delivered 14% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Hawthorn Bancshares got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Hawthorn Bancshares ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Want to learn more about Hawthorn Bancshares's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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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