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Home Bancorp, Inc. (NASDAQ:HBCP) has announced that it will pay a dividend of US$0.23 per share on the 20th of May. Including this payment, the dividend yield on the stock will be 2.4%, which is a modest boost for shareholders' returns.
See our latest analysis for Home Bancorp
Home Bancorp's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, Home Bancorp's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
EPS is set to fall by 20.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 28%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Home Bancorp Is Still Building Its Track Record
Home Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the first annual payment was US$0.28, compared to the most recent full-year payment of US$0.92. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Home Bancorp has impressed us by growing EPS at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Home Bancorp's prospects of growing its dividend payments in the future.
Home Bancorp Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. For example, we've picked out 1 warning sign for Home Bancorp that investors should know about before committing capital to this stock. 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.