All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Home Bancorp in Focus
Based in Lafayette, Home Bancorp (HBCP) is in the Finance sector, and so far this year, shares have seen a price change of 10.08%. The financial holding company is paying out a dividend of $0.27 per share at the moment, with a dividend yield of 2.12% compared to the Banks - Southeast industry's yield of 2.33% and the S&P 500's yield of 1.59%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.08 is up 6.9% from last year. Over the last 5 years, Home Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 4.07%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Home Bancorp's payout ratio is 23%, which means it paid out 23% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HBCP for this fiscal year. The Zacks Consensus Estimate for 2025 is $5.05 per share, with earnings expected to increase 10.75% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that HBCP is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Home Bancorp, Inc. (HBCP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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