It looks like HBT Financial, Inc. (NASDAQ:HBT) is about to go ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 5th of February will not receive this dividend, which will be paid on the 16th of February.
HBT Financial's next dividend payment will be US$0.15 per share, on the back of last year when the company paid a total of US$0.60 to shareholders. Based on the last year's worth of payments, HBT Financial has a trailing yield of 4.0% on the current stock price of $14.93. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether HBT Financial can afford its dividend, and if the dividend could grow.
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. HBT Financial paid out a comfortable 45% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by HBT Financial's 16% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
HBT Financial also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Unfortunately HBT Financial has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Has HBT Financial got what it takes to maintain its dividend payments? HBT Financial's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We're unconvinced on the company's merits, and think there might be better opportunities out there.
However if you're still interested in HBT Financial as a potential investment, you should definitely consider some of the risks involved with HBT Financial. Case in point: We've spotted 2 warning signs for HBT Financial you should be aware of.
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.
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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