Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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
Home Bancorp (HBCP) is headquartered in Lafayette, and is in the Finance sector. The stock has seen a price change of 4.67% since the start of the year. The financial holding company is currently shelling out a dividend of $0.26 per share, with a dividend yield of 2.15%. This compares to the Banks - Southeast industry's yield of 2.26% and the S&P 500's yield of 1.48%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.04 is up 3% from last year. Home Bancorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 3.74%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Home Bancorp's current payout ratio is 22%, meaning it paid out 22% 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 $4.63 per share, which represents a year-over-year growth rate of 1.54%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HBCP is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
