The board of HomeTrust Bancshares, Inc. (NASDAQ:HTBI) has announced that it will be paying its dividend of $0.12 on the 27th of November, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 1.5% is only a modest boost to shareholder returns.

Check out our latest analysis for HomeTrust Bancshares

HomeTrust Bancshares' Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

HomeTrust Bancshares has a good history of paying out dividends, with its current track record at 6 years. While past data isn't a guarantee for the future, HomeTrust Bancshares' latest earnings report puts its payout ratio at 13%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to fall by 15.2%. Fortunately, analysts forecast the future payout ratio to be 16% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

HomeTrust Bancshares Is Still Building Its Track Record

It is great to see that HomeTrust Bancshares has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.48. This means that it has been growing its distributions at 12% per annum over that time. HomeTrust Bancshares has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. HomeTrust Bancshares has seen EPS rising for the last five years, at 17% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for HomeTrust Bancshares' prospects of growing its dividend payments in the future.

HomeTrust Bancshares Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 HomeTrust Bancshares that investors need to be conscious of moving forward. Is HomeTrust Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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