Hilltop Holdings' (NYSE:HTH) Upcoming Dividend Will Be Larger Than Last Year's

Hilltop Holdings Inc.'s (NYSE:HTH) dividend will be increasing from last year's payment of the same period to $0.16 on 25th of May. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.

View our latest analysis for Hilltop Holdings

Hilltop Holdings' Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for 6 years, Hilltop Holdings has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 35%shows that Hilltop Holdings would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 2.4% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 43%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Hilltop Holdings Is Still Building Its Track Record

It is great to see that Hilltop Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.64. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Hilltop Holdings has been growing its earnings per share at 5.8% a year over the past five years. Hilltop Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Hilltop Holdings' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Hilltop Holdings (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.