Hilltop Holdings Inc. (NYSE:HTH) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 13th of May will not receive the dividend, which will be paid on the 28th of May.
Hilltop Holdings's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.48 to shareholders. Based on the last year's worth of payments, Hilltop Holdings has a trailing yield of 1.3% on the current stock price of $35.92. If you buy this business for its dividend, you should have an idea of whether Hilltop Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hilltop Holdings has a low and conservative payout ratio of just 7.0% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Hilltop Holdings has grown its earnings rapidly, up 21% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, Hilltop Holdings has lifted its dividend by approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Has Hilltop Holdings got what it takes to maintain its dividend payments? Companies like Hilltop Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Hilltop Holdings 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.
So while Hilltop Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Hilltop Holdings has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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