Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) will pay a dividend of $0.13 on the 10th of February. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Home Federal Bancorp of Louisiana

Home Federal Bancorp of Louisiana's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Home Federal Bancorp of Louisiana has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Home Federal Bancorp of Louisiana's payout ratio of 46% is a good sign as this means that earnings decently cover dividends.

EPS is set to fall by 4.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 56%, which is definitely feasible to continue.

Home Federal Bancorp of Louisiana Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from $0.12 total annually to $0.52. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Home Federal Bancorp of Louisiana's earnings per share has fallen at approximately 4.4% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, a consistent dividend is a good thing, and we think that Home Federal Bancorp of Louisiana has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Home Federal Bancorp of Louisiana that investors should know about before committing capital to this stock. Is Home Federal Bancorp of Louisiana 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.