Home Bancshares (Conway AR)'s (NYSE:HOMB) Upcoming Dividend Will Be Larger Than Last Year's

The board of Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) has announced that it will be paying its dividend of $0.18 on the 7th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.

See our latest analysis for Home Bancshares (Conway AR)

Home Bancshares (Conway AR)'s Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Home Bancshares (Conway AR) has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Home Bancshares (Conway AR)'s last earnings report, the payout ratio is at a decent 40%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to rise by 5.8% over the next year. If the dividend continues on this path, the future payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Home Bancshares (Conway AR) Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was $0.12, compared to the most recent full-year payment of $0.72. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. 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. We are encouraged to see that Home Bancshares (Conway AR) has grown earnings per share at 11% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We should note that Home Bancshares (Conway AR) has issued stock equal to 24% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like Home Bancshares (Conway AR)'s Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Home Bancshares (Conway AR) that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.