Are You Looking for a High-Growth Dividend Stock?

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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

Headquartered in Lafayette, Home Bancorp (HBCP) is a Finance stock that has seen a price change of 6.23% so far this year. The financial holding company is currently shelling out a dividend of $0.27 per share, with a dividend yield of 2.2%. This compares to the Banks - Southeast industry's yield of 2.28% and the S&P 500's yield of 1.6%.

Looking at dividend growth, the company's current annualized dividend of $1.08 is up 6.9% from last year. In the past five-year period, Home Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 4.07%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Home Bancorp's current payout ratio is 23%. This means it paid out 23% of its trailing 12-month EPS as dividend.

HBCP is expecting earnings to expand this fiscal year as well. 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 a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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This article originally published on Zacks Investment Research (zacks.com).

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