Heartland Financial USA, Inc.’s (NASDAQ:HTLF) investors are due to receive a payment of $0.30 per share on 27th of February. This means that the annual payment will be 3.2% of the current stock price, which is in line with the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Heartland Financial USA’s stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Heartland Financial USA
Heartland Financial USA’s Dividend Forecasted To Be Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
Heartland Financial USA has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don’t necessarily translate into future results, the company’s payout ratio of 25% also shows that Heartland Financial USA is able to comfortably pay dividends.
The next 3 years are set to see EPS grow by 46.8%. Analysts forecast the future payout ratio could be 26% over the same time horizon, which is a number we think the company can maintain.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.40 in 2014, and the most recent fiscal year payment was $1.20. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Heartland Financial USA has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Heartland Financial USA Could Grow Its Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It’s encouraging to see that Heartland Financial USA has been growing its earnings per share at 9.0% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Heartland Financial USA’s Dividend
Overall, we like to see the dividend staying consistent, and we think Heartland Financial USA might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we’ve identified 1 warning sign for Heartland Financial USA that investors need to be conscious of moving forward. Is Heartland Financial USA not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
